Garamendi, Auto Insurers Clash on Study : Insurance: The commissioner says his survey shows that companies are redlining central L.A. The insurers disagree.
California’s top auto insurers write proportionately far fewer policies and employ far fewer agents in central Los Angeles than in other cities, according to a survey released at a public hearing Thursday by Insurance Commissioner John Garamendi.
Accusing the insurance industry of abandoning the inner city, Garamendi renewed calls for anti-redlining regulations to reward insurers that perform well in “underserved” neighborhoods and punish those that don’t.
He blasted commercial and homeowners carriers as well as auto insurers, although the survey addressed only auto coverage.
Industry officials, responding during a daylong public hearing, denied that the statistics prove the existence of redlining. It is natural, they said, for an industry to have most of its sales and most of its employees in areas where people can best afford its products.
Industry representatives charged Garamendi with ignoring the factors most responsible for putting insurance out of reach of many Californians--namely the high cost of fraud and litigation.
“Not one provision of these regulations addresses making insurance more affordable,” said John C. Millen, a spokesman for Farmers Insurance Group.
Garamendi acknowledged that the proposed regulations address geographic availability, not price. But when large insurers ignore an area, he said, the result for those who live there is higher prices and poorer-quality insurance.
The proposal was endorsed by a broad alliance of consumer groups called the Greenlining Coalition.
The rules would require insurers to submit detailed reports on the locations of their agents, offices and customers; the racial, ethnic and gender makeup of their boards of directors, managements, policyholders and insurance applicants; their charitable contributions, and the availability of employees speaking languages other than English.
The data would be used to rank insurers based on their performance in “underserved” areas. Top-ranking firms would be granted profit levels up to 25% higher than they would otherwise receive. Sub-par performers’ earnings levels would be cut by as much as 25%.
The department’s survey of 36 auto insurers listed the number of policies sold and agents employed last year in each of 10 cities: Anaheim, Fresno, Long Beach, Los Angeles, Oakland, Sacramento, San Diego, San Francisco, San Jose and Santa Ana. The department then calculated ratios showing how much insurance was written in each city relative to the number of registered vehicles.
State Farm Insurance Cos., the state’s top auto insurer, wrote 224 policies per 1,000 vehicles in San Jose, but only 42 per 1,000 in central Los Angeles (defined as areas with ZIP codes beginning 900, which excludes the San Fernando Valley).
Dick Donegan of Allstate Insurance Co. said that while Allstate has only 4% of the auto market in central Los Angeles, it covers 21% of the homes. “We’re not under-serving Los Angeles,” he said.
Garamendi said Thursday that if his proposed rules had been in place, the pain caused to businesses by the riots would have been lessened. Asked before the hearing why he had not implemented similar regulations that he proposed more than a year ago, Garamendi said he feared that the state Office of Administrative Law would have rejected the rules in their earlier form.
