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Blame it on your ‘consumer champ’

JAMIE COURT, author of "Corporateering" (Tarcher/Penguin, 2004), is president of the Santa Monica-based Foundation for Taxpayer and Consumer Rights.

THERE WAS A TIME in California when consumers put an initiative on the statewide ballot demanding an end to auto insurance rates determined in large part by ZIP Code. The year was 1988, and the initiative passed. So why are drivers on one side of a ZIP Code line still paying premiums hundreds of dollars higher than if they lived across the street? Ask Insurance Commissioner John Garamendi.

Proposition 103 declared: “Automobile insurance rates shall be determined primarily by a driver’s safety record and mileage driven,” not ZIP Code. There were a number of legal challenges, but the validity of the law was settled by the time Garamendi, who prides himself on being a consumer champion, came into office in 1991.

He’s insurance commissioner again today, but he has never developed regulations to enforce this provision of Proposition 103. (Though the rest of the measure -- for instance, by blocking unnecessary rate increases -- has saved state motorists billions of dollars.)

Here’s the sorry history:

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January 1991: Garamendi, new in office, pledged: “Starting today, the Department of Insurance’s failure to obey the mandate of the people is over. Proposition 103 will be fully implemented -- and fast.”

December 1994: Just before leaving office, Garamendi said: “My administration ran out of time.... It remains for ... Commissioner-elect [Chuck] Quackenbush to complete the regulatory process. I urge him to do so quickly.” (Not surprisingly, Quackenbush, elected with $6 million in insurance industry contributions, didn’t follow that advice.) After Quackenbush resigned in disgrace, Garamendi found himself back in charge in January 2003.

December 2003: Addressing the ZIP Code system at a state hearing, Garamendi said: “I’m driving in San Francisco 80 miles through the worst traffic in America. My rates happen to be low because I’m [living in] one of those rural areas, but ... I’m driving into San Francisco, so tell me why I should be paying less even though I may commute daily into San Francisco?”

January 2004: Garamendi was told how two drivers with the exact same characteristics -- living on opposite sides of Vermont Avenue near El Segundo Boulevard, the border between the 90044 (South Los Angeles) and 90247 (Gardena) ZIP Codes -- would be charged differently. The one on the 90044 side, would pay $500 more, a 53% difference. Moved by such testimony, Garamendi declared: “I will change the regulations.... Let there be no doubt about that. There has been sufficient information ... to convince me that the current regulations are unjust, unfair, and must change. That will happen. The schedule is such that by midsummer [2004] there will be new regulations.”

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May 2005: “I intend to change the ZIP Code rating program in California before I leave [office in December 2006].”

The only reasonable explanation for allowing this cycle of failed promises to go on is political ambition. Garamendi has long harbored higher political hopes, and he has declared his intention to run for lieutenant governor next year. The speculation is that he doesn’t want the powerful insurance industry to line up with his Democratic opponents in the primary race.

If the last major provision of Proposition 103 remains unenforced at year’s end, the 15th anniversary of Garamendi’s promise, it will be hard to ever take him at his word again.


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