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home / insurance / in the media

San Francisco Chronicle
Mar 08, 2001

Make Insurance Rates The Same for Rich, Poor

San Francisco Chronicle Editorial
IT'S WRONG to charge poor people more for the same goods and services that affluent folks get for less. The inequity is especially odious when those paying the most are really subsidizing the bad habits of those who ought -- and certainly have the means -- to pay their own way.

Yet, that is the case with the state's haywire car insurance system, which routinely penalizes people due to their economic status.

How else to explain the ludicrous notion of "territorial rating" that allows insurance companies to use ZIP Codes to set insurance rates? Under the system, good drivers in bad neighborhoods often pay more for insurance than residents of wealthy areas with reckless driving histories.

Of course, none of this is exactly new. In fact, it was anger at such discrepancies that led rebellious voters to pass Proposition 103 in 1988. The insurance reform initiative all but outlawed territorial pricing by mandating that premiums be based on how you drive, not where you live.

By that law, driving safety, annual miles driven and driving experience are supposed to count more than your neighborhood. But in 1996, now-defrocked state Insurance Commissioner Chuck Quackenbush created loopholes that allow insurers to use ZIP Codes to determine pricing policies.

An Alameda County Superior Court invalidated the regulation in 1998. But Quackenbush persisted, and last year the state Court of Appeal sided with him and insurers to uphold territorial ratings.

Now, consumer groups and local governments, including Oakland and San Francisco, have asked the state Supreme Court to consider the matter. And, oddly, new Insurance Commissioner Harry Low has joined insurance companies in opposing such a review.

It's a curious move for Low, who has helped restore public confidence in the Department of Insurance that Quackenbush left shaken and morally bankrupt.

Given the history of territorial ratings -- a waylaid public mandate and their uneven impact on consumers -- the high court should take on this issue. There's not an ounce of justice in charging poor people with good driving records more for car insurance than other people.

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