Officials comment on insurance rate changes

By Mary Weston/Staff Writer

Elected officials and representatives agree the insurance commissioner's proposed changes for insurance rating would increase auto insurance rates in rural area and decrease rates in big cities.
Television ads aired this week-end warned about higher insurance rates in the Northstate including 19 counties throughout the state if proposed insurance rate changes are adopted.

Mayor Gordon Andoe said although he isn't sure exactly how the proposed rate change would work, it sounds as though drivers in one area would be subsidizing drivers in another area.

"If we live in Butte County, then we should be paying rates based on the risks in Butte County," Andoe said. "We should not be paying higher rates based on the driving rates in L.A."

At issue is the interpretation of Proposition 103, which California voters approved in 1988. The measure requires insurance companies to base rates mainly on the three key factors. Garamendi says many insurers continue to rely too heavily on ZIP codes, gender and other factors, in violation of the law.

In December, the Department of Insurance proposed new regulations for auto insurance rating that Californians to Stop Unfair Rate Increases say would give arbitrary discounts to drivers in the state's biggest cities, instead of basing auto insurance rates on proven costs and risks.

The group is a coalition of elected officials, chambers of commerce, insurance companies and taxpayer groups dedicated to fighting proposed auto insurance regulation that they say will unfairly raise rates for millions of drivers statewide.

Coalition members are asking Insurance Commissioner John Garamendi to stop his department from increasing car insurance rates on drivers in rural areas so they can arbitrarily decrease rates on drivers in congested big cities.

The coalition urges Northstate residents to write the insurance commissioner opposing the rate changes, or go to their website (www.stopunfairrates.org) to comment to the commissioner online or get more information.

Auto insurance rates are currently based on the costs and risks associated with providing insurance to each driver.

The proposed changes would reduce the influence of the ZIP code location in formulas that calculate insurance rates. By reducing the location influence, drivers in more congested areas of the state like Los Angeles and San Francisco where there's more risk of accidents and theft would pay less for auto insurance, according to Megan Cayhill, spokesperson for the coalition.

Conversely, according to this interpretation, rates would increase for drivers in more rural and suburban areas, where there's fewer people on the road and less risk of accident.

"That insurance regulation is just typical of how we get treated in rural areas," said Butte County Dist. 1 Supervisor Bill Connelly. "We supplement their water. Now they want us to supplement their insurance rates."

Insurance Commissioner John Garamendi refutes that interpretation on his website. "If you believe, as I do, that your insurance rates should be based more on how safely you drive than where you live, you might want to learn the real facts about my new regulations," Garamendi states.

"It is simply not true that your rates must rise as a result of the regulations. In fact, as a good driver your rates may well decrease."

Some of the largest carriers, like State Farm, Farmers, Allstate, Safeco, and 21st Century, are sometimes the most expensive, Garamendi claims. He says regulations will help stop insurers from charging good drivers too much money.

But Butte County Dist. 4 Supervisor Curt Josiassen thinks Garamendi's proposal is a ploy to gain votes from more populous areas, by giving them rate decreases at the expense of people in less populated areas. Garamendi is running for Lt. Governor in the June primary.

"We don't have the votes up here, so we're always getting hammered," he said.

Josiassen said the proposal would increase rates in rural areas and decrease rates in metropolitan areas. He views it as something like the Lake Oroville Dam where residents of the Northstate would subsidize residents of the central and Southstate.

"We live here for a reason, and we shouldn't have to do that," Josiassen said.

Josiassen also doesn't buy the claim that the new rate would give good drivers lower rates, as insurance companies already give good driver discounts.

Maureen Kirk, vice mayor of Chico, also urged local residents to challenge the proposed change.

"I just think it's unfair the rates are going to increase by about 14 percent in Butte County because of the way they are going to rate auto insurance," Kirk said. "Why should good drivers here pay more so good drivers down south can pay less?"

An analysis contracted by the insurance department indicates the change could mean large increases for most drivers in the state's rural areas. The analysis concluded most drivers in urban counties such as Orange, Los Angeles and San Francisco would see large decreases in their rates.

Interestingly, the cities of Los Angeles, San Francisco and Oakland support Garamendi's proposal. The cities' attorneys complain that rates based on ZIP codes discriminate against drivers in poor, urban neighborhoods, according to an article in the North County Times.

State Assemblyman Doug La Malfa wants to block Garamendi's rate changes. On April 2006, a group of Republican lawmakers including LaMalfa introduced Assembly Bill 2840, which would require the state to conduct a study analyzing the impacts of rate changes for all drivers before they can be implemented.

LaMalfa said Proposition 103 allowed the insurance commissioner some leeway to fiddle with the way insurance is rated. Bill 2840 would counteract that.

"This bill will introduce some accountability into the way insurance is rated," La Malfa said. "Garamendi's proposal would be very harmful to rural insurance buyers. All our rural counties would see a rate change of 10 to 40 percent. By taking out the emphasis of geography, it defies the reality that rural drivers have less risk of accidents, car theft and vandalism."