Orange County Leads State in Uniform Auto Insurance Rates

Auto insurance rates are far more uniform in Orange County than throughout the rest of the state, according to a first-ever statewide comparative survey by the California Insurance Department.

Nevertheless, depending on where a motorist lives in Orange County, annual auto insurance premiums still can vary by as much as $110, according to the survey.

Insurance industry spokesmen said Tuesday that the relatively slight variances among rates in Orange County reflect the generally homogeneous nature of a county that lacks dramatic disparities from neighborhood to neighborhood in auto thefts, traffic accidents, medical costs and other factors that determine how much insurance companies charge their customers.

“The reality is (rates) are based on cost experiences in those territories,” said George Meno, senior regional representative of Insurance Services Office, an organization that calculates loss figures for insurance companies. “The reality is, if you pack 100 cars into a large area, your chances of having accidents (are) greater than if you pack them into a much smaller area.”

Leader in Suits

One significant factor affecting insurance rates in the county, one industry spokesman said, is auto accident-related litigation, and Orange County in the past year has become the per-capita leader among California counties for such lawsuits.

The rate survey found that coverage can vary in price by more than 300% at some California locations, but the greatest differential found in Orange County was 86.9%.

The highest rate found in Orange County, based on minimum coverage for a hypothetical motorist, was $572 from Mercury Casualty Co. for a resident of Costa Mesa. The lowest was $306 for an Irvine resident insured by the same company.

Mercury Casualty marketing Vice President Bruce Norman said his firm probably has divided Orange County into more territories than other companies use, allowing it to charge “a premium commensurate with your exposure or expected losses” in a given area.

“We’ve simply found that if the territories are smaller, your pricing is more accurate,” Norman said. “That provides greater equity in your rates. People pay a premium more closely associated with what their expected losses are.”

Congested Beach Areas

Norman said rates tend to be highest in congested areas, particularly beach cities.

Although the disparities in Orange County are substantially less than elsewhere in the state, rates differ in the county according to location and company.

The Farmers Insurance Co. rate for a hypothetical driver between 35 and 55, married, with no young drivers and no citations or accidents, varies from $517 in Santa Ana and Anaheim to $423 in Mission Viejo and San Juan Capistrano.

But Liberty Mutual sells coverage to the same hypothetical driver for $424 in Santa Ana and $306 in San Juan Capistrano.

“Rates are based on the loss experience of the individual companies,” said George Watts, president of Western Insurance Information Service, a “consumer education service” financed by 40 insurance companies.

“There are cases where a community has fewer accidents and the rates are higher,” he said. “Insurance rates are based on the number of claims paid and the dollars paid” through lawsuits.

“It’s not a perfect system, it’s just the best that has been figured out so far,” Watts said.

Insurance Services Office’s Meno said it is “in the eye of the beholder, whether there are inequities or not. It seems inequitable if you live in Los Angeles and have to pay more than the guy in Redding. But if you were in Redding and you knew it cost less to insure your car, you wouldn’t think it is inequitable.”

‘Very Homogeneous Area’

John McCann, a regional vice president with the Insurance Information Institute in San Francisco, a national public relations firm for the insurance industry, said “Orange County is a very homogeneous area. It doesn’t have any area I would perceive as having very serious automobile-loss costs.”

In Orange County, McCann said, “when the rates are close, that usually means (the area) is a very homogeneous area and . . . there’s a very high level of competition for the business.”

“That may be the only county like that in the state,” McCann said.

However, he said, in recent years another set of statistics has developed for the county as a whole.

Orange County has moved from the No. 3 county in California to No. 1 on the Insurance Information Institutes’ “litigation index,” which is based on the number of lawsuits stemming from personal injury, death or property damage involving automobiles.

Suits Drive Up Rates

The litigation index for Orange County jumped 24.2% from fiscal year 1983-84 to 1984-85, he said. The index number increased from 284.95 lawsuits filed per 100,000 population to 353.96, he said.

Orange County passed Los Angeles with its 325.12 index, followed by San Francisco with 307.88, Sacramento at 285.50 and Santa Clara at 249.83. The remainder of California’s 58 counties are at or below the state average of 244.44, he said.

The ultimate effect of increasing lawsuits has been to drive up rates, McCann said. Litigation is one of the main factors in determining insurance premiums and is “very much geographically related,” he said.