State Farm Plan Gives Rate Break to Big Vehicles

By LIZ PULLIAM WESTON

Nov. 29, 2000 12 AM PT

TIMES STAFF WRITER

State Farm Insurance Cos., the largest auto insurer in California and the nation, unveiled a controversial plan Tuesday to lower insurance premiums for drivers of some of the biggest vehicles on the road while boosting rates for smaller, cheaper cars.

The pricing plan, likely to be followed by other insurers, could raise or lower the medical portion of some drivers’ insurance premiums by at most $50 a year. But consumer advocates objected to the principle of giving any price break to vehicles that cause the most damage to other cars in crashes.

“It’s a marketing ploy with the worst kind of social implications,” said Jamie Court, executive director of the Santa Monica-based Foundation for Taxpayer and Consumer Rights, which follows insurance issues. “It’s troubling for the industry because it tends to legitimize the use of vehicles that cause a lot of damage to other cars in accidents.”

State Farm said the plan would benefit drivers of the cars and sport-utility vehicles that best protect their occupants. Certain Chevrolet Suburbans, the GMC Yukon and Ford’s F250 pickup truck are among the vehicles that would receive the maximum discount, as are some BMWs, Jaguars, Mercedes-Benzes, Saabs and Volvos.

Under the plan, State Farm would eliminate its automatic discount for air bags and passive safety belts for vehicles built after 1993. In its place, the company would offer discounts based on a vehicle’s safety record--specifically, how often and how badly people have been injured when involved in an accident while riding in a particular model of vehicle.

Not all big vehicles would benefit from the change. Owners of Ford Excursions, two-door Ford Explorers, GMC Safari vans and Chevy Blazers, among others, could pay a bit more under the system, based on safety ratings posted at the State Farm Web site (https://www.state farm.com).

Popular models such as Toyota Camry, Honda Accord and Civic and the four-door Ford Taurus are among the smaller cars whose owners could pay higher premiums.

Overall, about one in six State Farm customers would pay more under the system and the same number would pay less.

The new pricing plan would apply only to the medical coverage portion of an insurance policy--or personal injury coverage, as it’s known in some states. This pays for injuries sustained by the insured driver and passengers in the vehicle and typically accounts for only 10% to 20% of a policy’s total cost.

State Farm is expected to seek approval for the change in California in the next two weeks, said Scott Edelen, California Department of Insurance deputy commissioner. The plan will be subject to public comment for 45 days before the department acts. State Farm has received approval to implement the change starting Jan. 1 in 44 other states and the District of Columbia.

Any change adopted by State Farm probably will be copied by other insurers because of the company’s hefty market share. In 1999, State Farm insured 18.9% of the U.S. market and 14% of the California market.

“It’s going to force other companies to at least look at” car-specific safety discounts for medical coverage, said Candysse Miller, executive director of the Insurance Information Network of California.

Currently, drivers with air bags or automatic seat belts get a 30% “passive restraint” discount from State Farm on their medical coverage premium. Because vehicles built after 1993 are almost universally equipped with air bags, however, State Farm found its discount system almost meaningless as a way to differentiate safer cars from their less-safe brethren, said State Farm spokesman Dick Luedke.

Under the new system, vehicles built in 1994 or later would qualify for discounts of 20%, 30% or 40% based on their safety ratings. Cars built before 1994 would continue to qualify for the 30% discount if they have air bags or passive seat belts.

State Farm has no plans to change how it charges for liability insurance, which covers damage a driver inflicts on another car and its passengers. Luedke said the company’s claims data show that though sport-utility vehicles and other heavy cars inflict more damage in accidents, they tend to be involved in fewer accidents, offsetting the increased costs.

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State Farm’s Safest Vehicles

Acura RL

Audi A6 station wagon

BMW 740i and 750i

Buick Regal

Chevrolet Express 2500 and 3500 vans, Suburban C1500 and K1500 sport wagons

Chrysler Town and Country van

Dodge B2500 Ram van and wagon

Ford Econoline E150, E250 and E350 vans; F150 and F250 pickup trucks

GMC Savana 1500, 2500 and 3500 vans; Yukon XL C1500 sport wagon

Infiniti Q45