USAA to Base Premiums on Drivers’ Experience

A second California insurance company broke ranks with its bigger competitors Tuesday and said it would base its premiums on a person’s driving record and experience, not where a car is parked.

USAA, the state’s ninth-largest automobile insurer, said it would cut rates for 318,000 California customers by an average of 5%, lopping about $100 off their annual premiums. The combination of general discounts and the new rating formula could reduce rates for at least 75% of its members in California, the San Antonio-based company said.

Most of the reductions would go to drivers in Los Angeles, San Diego, San Francisco and Sacramento, USAA said. Last week, it announced that homeowners’ premiums would drop by an average of 22%. USAA insures active and retired military members and their extended families.

“California is the latest in a series of states where we’ve been able to cut rates for our members,” said Joe Wehrle, president of USAA Property and Casualty Insurance Group. “Particularly in California, where drivers are paying over $3 for a gallon of gas, USAA’s auto rate cuts will come as good news.”

USAA’s decision to stop using geography as its primary risk factor in setting premiums follows a similar move in July by the Automobile Club of Southern California. Both companies are complying with new regulations issued by state Insurance Commissioner John Garamendi.

California’s other leading auto insurers, led by Farmers Insurance Group, State Farm Fire & Casualty Co. and Allstate Corp., are challenging the commissioner’s rules in state court, contending that they are arbitrary. A hearing on a request for an injunction is scheduled for Thursday in Sacramento County Superior Court.

The commissioner said Tuesday that a judge was unlikely to grant an injunction now that two auto insurers have filed rating plans that cut rates and comply with the new regulations.

“Automobile insurance prices are coming down, and good drivers are being rewarded,” Garamendi said.

Premium reductions by USAA and the Auto Club reflect the peculiarities of those companies’ customers and have no bearing on the fairness of the new rules, said Nicole Mahrt, a spokeswoman for the American Insurance Assn.

The group said Garamendi’s regulations would raise premiums for 60% of the state’s drivers living in suburban and rural communities.