Fairer auto insurance

Editorial

WHEN VOTERS PASSED Proposition 103 in 1988, they did so, in part, to change the way auto insurance rates are calculated. The measure required insurance companies to give more weight to a driver's record and experience than to his or her address, gender or marital status when setting rates.
Unfortunately, reform of the auto insurance industry has come slowly. There is still much room for improvement.
California Insurance Commissioner John Garamendi agrees and has proposed changes that should have been made long ago.
He wants to make driving records, experience and miles driven the key factors in setting rates. Currently, too much weight is given to a driver's ZIP code.
As a result, drivers with good records end up paying high rates because of where they live, not because of how careful they are.
Often, minorities in large urban areas suffer because rates are highest in their neighborhoods.
That is why the National Association for the Advancement of Colored People and consumer groups have long sought reforms in the way rates are calculated.
Insurance firms argue that the current system is fairer than it would be under Garamendi's plan. We do not agree.
While it may be true that risk correlates with certain factors such as ZIP code, gender and marital status, it is unfair to assume that everyone in a certain area or group has the same risk of having an accident.
It is fairer to base risk on actual driving experience, rather than general correlations. If someone has been driving accident-free for many years, he or she deserves to have a lower rate than someone who has had several claims, regardless of address or gender.
If it turns out that people living in urban areas have more accidents, then those drivers who make multiple claims will see their rates rise.
It could well be that insurance firms collect as much revenue from premiums in urban areas as they do now, but the burden would be on those who are involved in accidents, not everyone, regardless of their driving record.
The reverse is true in rural areas. If the risk is low, then most drivers are likely to have good records and lower insurance rates.
Just because it may be easier to calculate rates based on ZIP codes and other generalized data rather than examining individual drivers' records, it is no reason to continue the current system. Garamendi's new program deserves a chance.