California Drivers Get a Break
Nine years after voters passed Proposition 103 to curb auto insurance hikes, insurers are finally eliminating the unfair practice of using ZIP codes to set rates. They have filed new rate proposals which, if approved by the Department of Insurance, should lower premiums, especially for good drivers in inner city areas.
Some auto premiums have already declined in the past year, for various reasons, so consumers may be surprised that premiums don’t yet fully reflect all the premium-cutting requirements of Proposition 103. The reform measure requires insurers to base premiums on driving records of motorists, rather than on their place of residence. Other requirements for good-driver discounts and rebates have been implemented piecemeal over the years. Now, after years of stalling under lawsuits, regulatory delay and controversy, the provisions of Proposition 103 will be largely in place.
The proposed new rates filed by insurers last month would, for the first time, fully comply with Proposition 103. The new rates are also supposed to reflect savings under new limits on the ability of uninsured motorists to sue for pain and suffering. This change came last year with the passage of Proposition 213.
State Farm, the largest auto insurer in California, has proposed average rate cuts of 8.4% in Los Angeles County, 8% in Orange County and 5.1% in San Bernardino County. Good drivers in central Los Angeles would get a 17% reduction; those in San Fernando Valley would get a 10.2% cut. Statewide, State Farm would reduce rates an average 5.3%.
Other insurers say their reductions will not be as steep. The Automobile Club of Southern California, for example, said it will cut rates by 2.4% on average statewide, and by about 10% in central Los Angeles, Inglewood and Gardena. By contrast, rates will go up for some rural drivers. Many companies have asked for extensions and have yet to file their rates. Insurance Commissioner Chuck Quackenbush should closely monitor these delays.
Auto premiums in California are still among the highest in the nation. But this relief is welcome, even nine years late.
