California’s auto insurance business has become increasingly competitive, with companies cutting rates and improving services. For many consumers, now is a good time to : Look Around

Two thoughts crossed Angela McDonald-Baker’s mind as she surveyed her Honda Civic, crumpled between two other cars after an accident on Fairfax Avenue June 24.

Oh, this is going to be expensive, she thought. And getting it fixed will be such a hassle.

The last time McDonald-Baker, 26, was involved in an accident, she spent days haggling with her insurance company and shuttling to and from car repair shops. That’s why she was so surprised when her new insurance company, Progressive Corp., sent an agent to her workplace the next morning. Twenty minutes later, McDonald-Baker had a $978 check for the damage in hand.

The adjuster “was right on with the money--it was exactly what it cost to get the car fixed, minus my deductible,” said McDonald-Baker, a human resources specialist with a West Los Angeles property management firm. “I was just amazed.”

On-the-spot adjustments are only one way that companies in California are trying to distinguish themselves in the increasingly competitive world of auto insurance. Insurers are cutting premiums, adding services and comparing their rates directly to rivals’ as they vie to win new customers.

Rates have come down at least 5.5% in the last three years, saving drivers nearly $400 million in reduced premiums and rebates, the California Department of Insurance estimates. Insurance analysts expect the declines to continue as insurers fight harder for market share.

“It’s a great time for consumers to shop and save some money,” said Kenneth Adams, spokesman for the Western Insurance Information Service, an industry trade group.

Los Angeles resident Sarah Klein, 59, found that out when she shopped for coverage for her 1992 Honda Prelude. Her new policy with the Automobile Club of Southern California costs $1,500 a year--$500 less than she paid Liberty Mutual Insurance last year, and even $300 less than the new rate Liberty had quoted her.

*

But the price war isn’t benefiting all consumers equally. Consumer advocates say urban residents, particularly those in low-income neighborhoods, still pay too much.

Consumers have “probably benefited overall, but your ZIP Code still counts the most,” said Gina Calabrese, senior counsel for the Santa Monica-based Proposition 103 Enforcement Project, an advocacy group pushing for insurance reforms. “It’s an exasperating and unfair practice, especially for people who are just trying to make it.”

California’s price war reflects a national trend toward lower rates, as safer cars and safer drivers reduce insurance claims, and while smaller, aggressive companies seek to expand their share of the auto market, insurance experts say.

An aging population means fewer accidents as baby boomers slow down and take fewer driving risks. Tougher drunk-driving laws, better fraud enforcement, better anti-theft devices and widespread use of safety features such as airbags and anti-lock brakes also have reduced claims.

The average paid claim nationally for bodily injury, for example, dropped 7% between 1993 and 1996, to $10,610, according to the Insurance Information Institute, a trade group.

Insurers also cite lawsuit reforms and legal decisions that limit their potential payouts as a force behind the dropping rates. One example: Proposition 213, which California voters approved in 1996, prohibits drunk drivers, uninsured motorists and fleeing felons from suing for pain and suffering damages.

It’s a far different climate from that of a decade ago, when rising costs led to soaring auto insurance rates, which in turn prompted regulatory and voter backlash.

In California, urban voters disgusted with ever-rising premiums in 1988 helped approve Proposition 103, whose intent was that insurers would be required to count a driver’s record, years of experience and miles driven more heavily in rate calculations than where the driver lived.

Some insurers, including Progressive and Travelers Group Inc., fled the state rather than deal with the reforms and with regulators who were seen as too tough on companies. By 1995, three companies--State Farm Mutual Auto Insurance Co., Allstate Insurance Group and Farmers Insurance Exchange--were writing nearly half of the state’s auto policies.

But ZIP Code-based pricing lived on as insurers, the state and consumer advocates wrestled over how to implement the voter mandate. Last month a Superior Court judge rejected a complex rate formula devised by state Insurance Commissioner Chuck Quackenbush that allows insurers to continue relying heavily on ZIP Codes in setting prices. Quackenbush has not announced whether he will appeal the ruling.

*

Meanwhile, profits were beginning to swell. Consumers Union, a San Francisco-based advocacy group, protested in 1996 that insurers were overcharging consumers by $800 million a year. The group said insurers’ net return on surplus, a key measure of profitability, was 27.9%, about twice the state-approved limit. State insurance officials rejected the consumer group’s study, however, saying it did not reflect rate cuts that were by then already taking place.

Indeed, companies with once-negligible market shares in California saw the profits State Farm, Allstate and Farmers were making and decided to seek a bigger piece of the action.

“It’s pretty much the new players who have stepped up the competition,” insurance trade group spokesman Adams said.

Progressive is now the state’s ninth-largest insurer, insurance department figures show. Mercury Insurance Group has nearly doubled its market share and now ranks sixth, accounting for 7% of the auto liability premiums sold.

The gains came at the expense of the big three. State Farm, which once wrote 1 in 5 California auto policies, now accounts for about 1 in 6, and Allstate’s market share has dropped to 8% from nearly 11% in 1995. Farmers lost about 1 percentage point, to 14.5%, over the same period.

Insurers also say that Quackenbush’s 1994 election reassured companies and encouraged them to expand into the California market.

“Quackenbush is a pro-free-market regulator who understands how markets work,” said Bruce Norman, Mercury marketing vice president. “His approach is to try and control prices through competition, not regulation.”

It’s an approach that disturbs consumer advocates, who say rates in general are still too high and that Quackenbush hasn’t implemented much-needed reforms such as reducing rates for urban drivers and seeing that insurance companies aren’t profiting unfairly.

“Laissez faire is not what the voters voted for,” said Calabrese, of the Proposition 103 Enforcement Project. “Laissez faire is what we had before, and it didn’t work.”

*

So far, the rate cuts haven’t been deep enough to hurt company profits, said Michael Lewis, an analyst with Warburg Dillon Read. Many publicly traded insurers have seen their stocks rise this year. Allstate’s is up 10.64% so far, and Progressive’s is up 26.49%. (Safeco Insurance Group stock has fallen, mostly because of storm losses on its home insurance business.)

But the competition will probably engender further rate cuts--and more aggressive marketing, said Blair Sanford, an analyst with Hoefer & Arnett in San Francisco.

“Rates are coming down faster than costs, which is shrinking the [profit] margin for these companies,” Sanford said. “My opinion is that you’re going to get companies butting heads a lot more” as they fight for customers.

Companies like Progressive, Mercury and 20th Century Insurance Group already take the head-on approach, using television and print ads and Internet World Wide Web sites to compare their rates with other insurers’.

The ads--and subsequent word of mouth--worked for Jeff and Lori Rogers, who moved this year from the Santa Ynez Valley to Saugus. Lori Rogers, 34, had been insured by State Farm since she started driving at age 16, but worried that their move closer to an urban area would make their premiums unaffordable.

“I knew that our rates were going to go up, so I started shopping around, and a friend recommended 20th Century,” Rogers said. “We were able to put both cars on the same policy for what it would have cost us [to insure] one” with their former company.

Progressive has adopted a high-tech, high-touch approach in which accident reports are beamed electronically from a central office directly to the laptop computers of its adjusters, who roam Los Angeles and Orange county streets in a fleet of 26 white Ford Explorers. The adjusters can print reports and checks on portable printers installed in the back of the vehicles.

“We’ve had occasions where the adjuster arrived on the accident scene before it even cleared and wrote a check,” said David Pratt, Progressive’s Southern California general manager.

Even less aggressive marketers have turned to rate cutting and service improvements to defend their market share.

The Automobile Club of Southern California cut its rates by 25% over the last five years, transforming it from one of the state’s more expensive insurers to one of the less expensive, Chief Executive Tom McKernan said.

“People trust the brand, they want the brand, but they’re not going to pay a huge price difference,” McKernan said.

The Auto Club also beefed up its claims service, opening a 24-hour telephone service center and forging alliances with auto repair shops, glass manufacturers and rental car companies to increase convenience and lower costs, McKernan said. Mail and Internet quote services have been added so potential buyers can comparison-shop directly, without going through agents.

“I don’t like the service with an intermediary,” said Long Beach resident Angela Martini, a substitute teacher who switched to the Auto Club after years with Mercury, which sells through agents. “You have to talk to your agent, who has to get back to you. . . . I like to deal with a company directly.”

*

State Farm and other agency-based insurers have so far resisted the urge to switch to direct marketing in California, but all have cut their rates. State Farm reduced its premiums 12% in the last three years and sent existing customers two dividends--an insurance term for a partial return of premiums--that totaled $165 million.

The company emphasizes the benefits of customer loyalty, such as its accident and ticket “forgiveness” programs and guaranteed insurance for longtime policyholders.

The forgiveness plan keeps premiums the same after a first ticket or accident if a policyholder has been with the company for nine years or more, said spokesman Bill Sirola. Typically, insurance rates skyrocket after a ticket or accident. After 10 years, the company guarantees it will continue to insure the policyholder.

Insurance experts say they can’t predict how far companies will go to win new customers, or whether too-hot competition will cause insurers to eventually drop out of the California market.

“At some point you’d start to see deterioration in their results,” said Darian Ryan, a senior financial analyst with the A.M. Best insurance rating company.

Fewer insurers could lead to a whole new cycle of rising prices. But so far, all of California’s 10 leading insurers have superior insurance ratings and claims-paying ability, indicating the fight--and the savings--could be protracted.

*

Liz Pulliam covers insurance, banking and personal finance. She can be reached by e-mail atliz.pulliam@latimes.com.

Highway 1, The Times’ new auto section, returns July 30 with its second monthly stand-alone edition. The theme will be car customization. Highway 1 also appears weekly in Classified.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Driving the Best Bargain

Auto insurance premiums vary by hundreds of dollars, depending on the insurer you choose, you driving record, the number of miles you drive and where you live, among other factors. No single company offers the lowest rates for every situation, and the state Department of Insurance urges consumers to shop around before buying coverage. The following hypothetical examples assumes the drivers have been licensed since age 16 and that they have chosen $500 deductibles on their comprehensive and collision insurance. The premiums cited are for one year of coverage.

*

Retired Couple

He is 65, she is 62. They drive a 1996 Chrysler New Yorker less than 5,000 miles a year. Their coverage limits: $100,000 for each person’s bodily injury or a total $300,000 per accident, with $50,000 for project damage.

*--*

East L.A. Bevery Hills Santa Monica Valencia Irvine 90022 90210 90402 91355 92620 Auto Club $1,000 $1,181 $885 $652 $598 Farmers 1,572 1,454 1,454 976 764 Progressive 1,275 1,429 1,250 1,038 801 Safeco 1,237 1,502 1,252 930 851 State Farm 1,337 1,630 1,326 967 814 Average 1,284 1,439 1,233 913 766

*--*

*

The Family

He is 44 and drives a 1992 Toyota Cary 20 miles each way to work. She is 40 and drives a 1994 Plymouth Voyager 12 miles each way to work. Their son, 16, is an honor student and drives the van occasionally. Their limits: $100,000 for each person’s bodily injury or a total $300,000 per accident, with $50,000 property damage.

*--*

East L.A. Bevery Hills Santa Monica Valencia Irvine 90022 90210 90402 91355 92620 Auto Club $2,987 $3,318 $2,523 $1,857 $1,694 Farmers 5,584 5,420 5,420 3,542 2,860 Progressive 5,534 6,468 5,634 4,571 3,657 Safeco 3,976 4,923 4,044 2,903 2,676 State Farm 3,965 4,954 3,961 2,882 2,422 Average 4,409 5,017 4,316 3,151 2,662

*--*

*

Single Guy

He is 26 and has one recent speeding ticket. He drives a 1995 Honda Accord LX Couple 18 miles each way to work. He has the state-mandated minimum coverage limits: $15,000 per person, $30,000 per accident, $5,000 property damage.

*--*

East L.A. Bevery Hills Santa Monica Valencia Irvine 90022 90210 90402 91355 92620 Auto Club $1,834 $2,051 $1,555 $1,182 $992 Farmers 3,066 2,960 2,960 2,026 1,618 Progressive 1,341 1,559 1,365 1,123 899 Safeco 1,262 1,504 1,292 984 908 State Farm 1909 2,383 2,003 1,464 1,252 Average 1,882 2,091 1,835 1,356 1,134

*--*

*

High Roller

She is 36 and drives her BMW M3 convertible 30 miles each way to work. She has the maximum liability coverage offered by each company.

*--*

East L.A. Bevery Hills Santa Monica Valencia Irvine 90022 90210 90402 91355 92620 Auto Club $2,911 $3,014 $2,197 $1,697 $1,507 Farmers 3,742 3,454 3,454 2,404 1,832 Progressive 2,763 3,164 2,781 2,288 1,796 Safeco 3,226 3,804 3,222 2,468 2,197 State Farm 3,223 3,836 3,179 2,319 1,954 Average 3,173 3,454 2,967 2,235 1,857

*--*

Note: The Automobile Club of Southern California (AAA) offers maximum liability coverage of $1 million with $1 million for accidents caused by uninsured motorists. Farmers offers maximum liability coverage of $500,000 with a $500,000 maximum for uninsured motorists. Progressive offers maximum liability coverage of $250,000 per person, $500,000 per accident and 100,000property damage with uninsured motorist coverage of $100,000 per person and $300,000 per accident. Safeco offers maximum liability coverage of $250,000 per person and $500,000 per accident with matching limits for uninsured motorist coverage. State Farm typically offers maximum liability coverage of $500,000 per person, $500,000 per accident and $500,000 property damage with uninsured motorist coverage of $250,000 per person and $500,000 per accident.

RESOURCES

Some insurers offer quotes via their Internet Web sites. Reno-based RealQuote (https://www.realquote.com) enables you to survey 50 or more insurers at once. The insurers include many of California’s largest, such as Allstate, Farmers, Mercury, 20th Century and the California State Auto Assn., but don’t include State Farm or the Automobile Club of Southern California.

Like any rate survey, RealQuote’s should be used for general comparisons only. Because no survey can cover all the discounts and policy variables offered by every insurer, the quotes may differ from the actual rate you would pay. Still, you can get an idea of which insurers might be least expensive for you.

InsWeb (https://www.insweb.com) offers quotes after you fill out an exhaustive survey that details everything from your profession to the custom details of your car. But InsWeb’s real value lies in the well-written primers, which help you better understand how auto insurance works, and in its auto insurance analyzer, which helps you determine how much coverage you need.

Find out if your car is at risk for theft--or if it puts you at risk of a fatal accident--at https://www.carsafety.org, the Highway Loss Data Institute’s Web site. Funded by insurers, this nonprofit research organization tracks injury, collision and theft data for most cars and trucks.

An insurance company’s rating can give you some clues about how strong the company is and how well it is able to pay off policyholders’ claims. A.M. Best, the leading insurance company rating firm, offers ratings at https://www.ambest.com. You can find ratings by Standard & Poor’s and Duff & Phelps at https://www.insure.com, another good general insurance Web site.

For those who prefer perusing a book to cruising the Internet, Merritt Publishing offers “How to Insure Your Car: A Step by Step Guide to Buying the Coverage You Need at Prices You Can Afford” in bookstores for $12.95.