Insurers must comply with Prop. 103

By John Russo, Dennis Herrera & Rocky Delgadillo
[Originally published in the Alameda Times-Star, Oakland Tribune and Daily Journals, July 5, 2003]
Consider this: a young, single man living in Oakland’s upscale Montclair district pays $3,400 per year for car insurance. But if that same driver, with the same driving record and number of years behind the wheel, moved five miles down the hill to the predominantly Latino Fruitvale neighborhood, he would pay $1,000 more for the same insurance.

In Southern California the disparity is even more galling. In San Luis Obispo, our hypothetical driver would pay $1,700 for insurance, but if that same driver moved to racially diverse South Los Angeles, he would pay over $7,800 — that’s a 360 percent difference.

How can this be fair? Why should great drivers who happen to live in challenged neighborhoods effectively subsidize lousy drivers who are lucky enough to live in better communities? It’s all a matter of how insurers use ZIP codes to determine premiums.

Often this is a proxy factor for other, less savory considerations. ZIP code profiling — whether intended or not — ends up discriminating against low-income and minority communities throughout California.

In 1988, California voters demanded fairness and equity in insurance rates by passing Proposition 103. This law requires insurance companies to base rates on three logical and equitable factors: driving record, miles driven, and years of driving experience.

Yet 15 years later, ratepayers in low-income areas throughout California are still sandbagged with exorbitant insurance rates based primarily on where they live, not on how they drive.

The current regulations adopted by disgraced former Insurance Commissioner Chuck Quackenbush allowed insurers to base rates mostly on more subjective factors such as ZIP code, marital status or gender — the same factors insurance companies used before voters passed Proposition 103.

This practice irrationally discriminates against the poor. And by charging higher rates to those who can least afford it, insurers engaged in this practice exacerbate the problem of uninsured drivers, putting all Californians, regardless of their income, at risk.

In late May, we — the city attorneys of San Francisco, Oakland and Los Angeles — joined forces with a broad coalition of consumer groups to urge Insurance Commissioner John Garamendi to require auto insurers’ compliance with voter-mandated Proposition 103.

In our petition we asked Garamendi to strike down the Quackenbush regulations which have allowed insurance companies to circumvent Proposition 103 by giving far more weight to where a person lives than how a person drives.

The petition allows insurers to consider ZIP codes when setting rates, but that factor must be given less weight than a person’s driving safety record, annual mileage and years of driving experience.

Within hours of our filing, Garamendi indicated that he would approve the petition and take public comment this summer and early fall, demonstrating the strength and effectiveness of this coalition.

Coalition members include Consumers Union, Spanish Speaking Citizens Foundation, National Council of La Raza, Southern California Leadership Conference of Greater Los Angeles, Foundation for Taxpayer and Consumer Rights, the City of Los Angeles, the city and county of San Francisco, and the city of Oakland.

Californians are required by law to have auto insurance. This petition would allow insurers the permissible discrimination necessary to charge a fair premium — one that is related to the driving record of the insured.

All of us in California, a state that prides itself in its passion for justice, should be proud of this collaboration. People should be judged by how they act, not how much they have in the bank. Drivers should be charged fair and equitable rates based on how they drive, not where they live.

John Russo is the city attorney in Oakland. Dennis Herrera is the city attorney in San Francisco. Rocky Delgadillo is the city attorney in Los Angeles.