Good driver? Bad driver? Insurers may wonder too
Consumer advocates claimed a huge victory last year when the California Department of Insurance ordered auto insurers to reduce their emphasis on where customers live in setting premiums and rely more on people’s driving records.
Among others, the Foundation for Taxpayer and Consumer Rights, a major proponent of the reforms, said the new system would give good drivers lower rates and force bad drivers to pay more. But there are flaws in this allegedly perfect picture: Much information is missing about who the bad drivers are.
The majority of the big counties in the state allow motorists to mask moving violations from their records by attending traffic violators school. Under the motor vehicle code, an individual can mask one citation every 18 months by going to school.
A driver can expunge at least two moving violations over the three-year period before they naturally expire. In some cases, drivers can game the system and expunge even more violations, if they occur in different counties.
Imagine two people walking into an insurance agent’s office, one having a perfect driving record and the other with two or more masked violations. As far as the agent knows, they are both equal and get the same premium. The system forces good drivers to subsidize the rest.
“Unfortunately, the driving records in California don’t reflect drivers’ history,” said Robert Villegas, a spokesman for State Farm, the largest auto insurer in California. “Many good drivers are penalized by this system, because we can’t tell who is a good driver and who is a bad driver by looking at driving records.”
How many tickets are masked? Plenty.
The California Department of Motor Vehicles said last week that 1,269,951 tickets were “dismissed” under the traffic violator school program in 2004.
These are supposedly “minor violations,” such as running red lights, making illegal lane changes, speeding and other infractions. They actually sound like fundamental causes of fatal accidents. The only difference in running a red light that kills somebody and one that doesn’t is the luck of timing.
Judges also allowed the masking of 773 two-point violations, which include drunk driving, reckless driving and hit-and-run accidents that would have remained on records for seven years.
Tickets and accidents, along with age, gender and license class, are good predictors of who is likely to get into a future accident, according to research by the DMV. A 1999 DMV research project identified 120,000 high-risk drivers who had about 26,000 subsequent accidents.
So why allow this bizarre system to take such critical information off the table? It is backed by a lot of drivers who rack up tickets, big government agencies that get a massive revenue stream from the system, an overburdened court system that doesn’t want motorists to challenge tickets and a huge “school” industry across the state.
Government likes the system. Every time a driver elects to go to traffic school, he or she must pay the ticket fine, the cost of traffic school plus administrative fees that amount to about $30 or more, sending millions into government coffers.
It also relieves courts already clogged with traffic cases. Without it, “people would fight tickets tooth and nail,” said Robert Stahl, who owns a traffic violator school and is president of the Driving School Assn. of California. (Driving schools teach new drivers and traffic schools handle violator classes.)
And then you have the school industry. There are 359 traffic violator schools in California, down 50% in recent years as online providers have moved in, said Gabe Roberson, a lobbyist for the industry. The DMV regulates traffic schools, but individual county courts regulate online “home study” schools.
It is a strange arrangement. For example, Los Angeles Superior Court, the state’s largest, has hired the Los Angeles County Housing Authority for $1.4 million to regulate the online schools here.
Theoretically, a bad driver might learn something from violator school.
“I am all for it, not because I own a traffic school but because people will drive less like idiots,” Stahl said. “The insurance industry would like to hammer you after the first ticket. Is that fair?”
But insurers say they seldom, if ever, raise rates after one ticket shows up, unless it is for drunk or reckless driving. And insurers doubt the schools do much good.
“How good are these schools? There was a topless driving school. What does that tell you?” said Pete Moraga, a spokesman for Allstate Insurance.
Byron Tucker, director of communications for the Department of Insurance, said his agency is only “working within the structure of the law.” Insurance Commissioner Steve Poizner and former Commissioner John Garamendi both have supported putting the emphasis on driving records that are clearly flawed.
The insurance industry says that ZIP Codes work, as a predictor of their costs. That’s because dense urban areas have more traffic, more car theft, more fraud and higher overall costs for repairs.
“Your ZIP Code is one of the best predictors for our costs of providing insurance,” Villegas said.
Even if you don’t believe the insurance industry, basing insurance rates on driving records should require greater transparency. Even Doug Heller, executive director of the Foundation for Taxpayer and Consumer Rights, acknowledges that the existing system is “imperfect,” but he argues that it is still better than ZIP Codes.
Insurers have filed for rate reductions since the new system went into effect, but they warn that only 15% of the new system has been implemented. By the time the reforms are complete, a lot of drivers are going to see rate increases in coming years.
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