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home / insurance / in the media

San Francisco Chronicle
Mar 02, 2001

by Greg Lucas

State Insurance Chief Defends Criteria for Auto Policies

He asks court not to hear case challenging rules using zip codes to help set rates
Siding with his GOP predecessor, Insurance Commissioner Harry Low defended regulations that consumer groups say unfairly make a driver's home address a bigger factor in setting insurance rates than driving record.

Low asked the state Supreme Court not to hear a case brought by consumer groups challenging the rate-setting rules. Low said an appellate ruling upholding the regulations should stand.

"In his first major test as insurance commissioner, Harry Low sides with Chuck Quackenbush and the insurance industry against consumers and the motorists of the state of California." said Harvey Rosenfield, author of Proposition 103, the auto insurance rate-slashing initiative approved by voters in 1988.

Low declined comment other than to say in a statement that the legal threshold for review by the Supreme Court was not met by Rosenfield's appeal.

The Supreme Court has 60 days to decide whether to hear a case once a petition for hearing is filed, but they extended that deadline by another 30 days.

The case stems from Proposition 103's requirement that a driver's safety record, number of miles driven annually and years of driving experience be the primary factors in determining auto insurance rates.

Before the initiative was approved, insurance companies primarily based rates on where a driver lived and the severity and number of accidents that occurred in that area or zip code.

That practice -- sometimes known as territorial rating -- was blamed for the high auto insurance rates paid by drivers in urban areas, particularly Los Angeles. High rates in urban areas contributed to higher numbers of uninsured drivers.

Insurers claimed that the price of their policies should be based on risk, and the best determiner of that was the amount and scope of accidents where a person lived, not their driving record.

Eight years after Proposition 103 passed, then-Insurance Commissioner Chuck Quackenbush created regulations requiring insurers to use the three factors in Proposition 103 as the primary way of setting insurance costs.

Rosenfield challenged the regulations saying they still allowed insurers to give greater weight to accident incidence within zip codes instead of driving records.

Quackenbush resigned in July 2000 under suspicion of using settlement money from insurers for political gain.

In August, Low -- a retired San Francisco appellate judge -- was nominated by Gov. Gray Davis to fill the remaining two years of Quackenbush's term.

In his confirmation hearings in the Legislature, Low said he viewed his role as an ''administrator" who would be "fair to everyone and that includes businesses."

Rosenfield's challenge was upheld by a Superior Court judge.

But last December, a San Francisco appellate court issued a 71-page opinion,

which said that the regulations managed to "implement most of (Proposition 103's) conflicting demands."

The court said that where a car is garaged is the single most important factor in determining risk of accident but noted that the regulations subordinated it to the factors cited in Proposition 103.

In asking the state high court not to hear the case, Low said there are not two conflicting appellate decisions that need to be resolved -- one of the court's reasons for taking a case.

Low also defended the appellate court ruling saying it exhaustively reviewed the record before reaching its decision.

"Surely the California courts have done their fully duty in providing appellate relief in the case," the brief concludes.

Rosenfield counters that the appellate ruling violates the will of the voters who passed Proposition 103 and that the high court must step in to create an insurance rating system actually based on driving record.

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