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home / insurance / in the media

BestWire
Mar 29, 2001

CALIFORNIA COURT ALLOWS INSURERS TO BASE AUTO RATES ON ZIP CODES

SACRAMENTO, Calif. (BestWire) - Insurers will be able to continue considering a driver's location when setting premium rates, after the California Supreme Court refused to consider a challenge to the law.

Democratic state Sens. Martha M. Escutia and Jackie Speier and the nonprofit Foundation for Taxpayer and Consumer Rights had asked the state's highest court to review an appellate court decision that agreed it's fair for insurers to use ZIP codes as one of the factors considered when setting rates.

The ruling will allow insurers to base rates "on actual costs in each region...and good drivers in low-income, rural areas of the state do not have to subsidize drivers in high-accident, high-income areas," Dan Dunmoyer, president of the Personal Insurance Federation of California, said in a statement.

The Regional Council of Rural Counties also applauded the court's decision.

"This is common sense and provides justice for people who live in the 28 rural counties we represent, who drive on open roads and in small towns, where their chances of being in an accident are far lower than for motorists who drive in big cities," Wesley Lujan, vice president of the council, said in a statement.

Under state law, insurers are required to base auto rates principally on three factors: how many miles a customer drives, the customer's safety record and how many years the customer has been driving. However, the law maintains that other criteria, including a driver's location, also may be used to set auto rates.

Consumer groups had argued that using ZIP codes to set rates punishes low-income urban drivers (BestWire March 22, 2001).

The top three personal auto writers in California, based on 1999 premiums, are State Farm Group, Farmers Insurance Group and California State Auto Group, according to A.M. Best Co. data.

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