Will your auto insurance rates increase? Rate battle continues
Terre Logsdon – Record-Bee staff
LAKEPORT ? The proposal from California Insurance Commissioner John Garamendi to base auto insurance rates on your driving record rather than where you live continues to be highly politicized. One one side, the insurance industry, some elected officials and chambers of commerce say rural drivers” rates will increase, and consumer groups and the insurance commissioner on the other say good drivers” rates should decrease ? no matter where they live ? even in rural Lake County.
Garamendi has proposed new regulations to fulfill the intent of Proposition 103, passed by voters in 1988, which immediately required insurance companies to roll back rates by 20 percent, give a 20 percent discount for good drivers and imposed regulations on the insurance industry. According to The Foundation for Taxpayer and Consumer Rights, this did not endear the insurance commissioner”s office to the insurance industry.
It also requires that personal auto insurance rates be determined primarily by a person”s driving safety record, number of miles driven annually and years of driving experience. Secondarily, rates can be based on where you live, if you are married or widowed, your gender and 13 other factors.
At is issue is no longer having your ZIP code (where you live) as the major factor in determining auto insurance rates, but whether or not you”re a good driver, no matter where you live, which voters put into law 18 years ago.
“First of all, my plan, contrary to what the insurance industry contends, does not distinguish between rural or urban drivers,” Garamendi said in a recent press release. “There is absolutely no element of this proposal that calls for higher rates in rural areas to subsidize lower rates in urban areas.”
“In fact,” Garamendi said, “good drivers in rural areas will likely see their rates go down under my proposal.”
Garamendi”s proposal just sets the boundaries of how insurance companies can formulate rates ? each company does it a little differently, which is a major reason rates are different from company to company ? but it”s the insurance companies themselves that determine what your rate will be.
“The fundamental point is Insurance Commissioner Garamendi”s rules do not micromanage what insurance companies have to do,” said Douglas Heller, executive director of The Foundation for Taxpayer and Consumer Rights. “His rules just set the boundaries to make sure the insurance field is fair. No company would be foolish enough to jack up rates ? another company would swoop in and take their customers, even in rural areas.”
It”s rural drivers that the Lake County Board of Supervisors signed on to protect with one coalition. Now Board Chair Anthony Farrington and District 5 Supervisor Rob Brown find themselves on the steering committee of another coalition ? funded exclusively by the auto insurance industry ? but neither supervisor knew they were listed as being on the steering committee until the Record-Bee told them Wednesday.
“The insurance lobby needs credibility,” Heller said, “and the supervisors give them credibility.”
These two coalitions have formed to denounce Garamendi”s plan, both are managed by a public relations firm and at least one group is funded exclusively by the auto insurance industry. One is the Californians Against Higher Insurance Rates (CAHIR) and the other is Californians to Stop Unfair Rate Increases (CSURI).
CAHIR and CSURI are coalitions managed by the public affairs firm of Bicker, Castillo & Fairbanks that specializes in issues management, grassroots advocacy and media relations, according to their Web site. They are also currently managing the “No on 82” campaign and “Cover California”s Kids” campaign.
Bicker, Castillo & Fairbanks has managed successful ballot initiatives in the past by “reframing the debate in the capitol community,” and “reframing the debate in the media,” according to their Web site.
“We couple our experience and expertise in a wide range of areas with our strong desire to always achieve our client”s bottom line public policy and business objectives,” their Web site states under Consulting Services. “The result is a custom approach for each client that helps them win, in the legislature, before regulatory agencies and before the voters.”
“They work for the insurances companies,” Heller said, “and do the public relations for the insurance companies. Their ads use insurance company information to get people to sign on to their cause. If the public heard it was run by the insurance industry, they wouldn”t give it a second thought.”
Bicker, Castillo & Fairbanks” account executive Megan Caygill, who submitted information and asked the Board of Supervisors to sign on to the CAHIR coalition and is working on the CSURI campaign, would not speak on the record for this story. Instead, she suggested contacting Brown and Farrington.
CSURI is the group placing media ads and mailers that say: “The sky”s the limit for increases to your auto insurance rates.” Their ads do not mention that they have received $2.4 million to finance this media campaign from five insurance companies ? 21st Century, Allstate, Farmers, Safeco and State Farm.
“The [auto insurance] industry, in order to protect the status quo and its marketing plans,” Garamedi said, “has launched a highly dubious $2.4 million advertising attack campaign against me and my proposal.”
In April, Garamendi requested the Federal Bureau of Investigation, the U.S. Attorney”s Office and the Attorney General of California investigate what he calls a threat from the insurance industry. He was told to postpone enacting his proposal until a new commissioner is elected in November, and that if he didn”t postpone it, a $2 million smear campaign against his proposal would begin.
Heller noted that State Farm, who is one of the companies funding CSURI, admitted in formal testimony to the California Department of Insurance earlier this year that the information CSURI is using in its media campaign regarding rate increases for rural drivers cannot be used to assess what impacts may occur if Garamendi”s proposal is implemented.
“There is … no study from which the impact on California policyholders can be assessed,” State Farm testified.
The Lake County Board of Supervisors joined the CAHIR coalition on April 25 to support AB 2840. “I”m looking out for rural California,” Farrington said Wednes-day. “It”s imperative.”
Brown said, “We want fair rates ? but not unfair rate increases,” which both sides of the issue say they are promoting. The question is who do you believe?
CAHIR began several years ago as an opposition campaign against Garamendi”s proposal, but now is focused on getting AB 2840 passed. This assembly bill would require that a study be conducted by the California State Library, California Research Bureau and would “prevent the insurance commissioner from adopting regulations that would change the weight given to any factor in determining auto insurance rates and premiums unless the department finds that the proposed change would result in rates and premiums that are substantially related to the risk of loss, and would not result in rates and premiums that are arbitrary or unfairly discriminatory.”
Brent Harrington, president and chief executive officer of the Regional Council of Rural Counties, told the California Farm Bureau that average incomes in rural areas are generally lower, making the impact of sharply higher auto insurance rates even more severe, which Supervisor Brown also said concerned him.
“If you look at the statistics, by and large, rural areas have a lower median income than urban areas,” he said. “If the rates are going to go up in the rural areas, then we”re going to see a financial impact from that. We”re quite concerned about it, and ultimately that”s what we would like to see reviewed as part of what”s included in AB 2840 as part of the study.”
“AB 2840 is a stalling tactic by the auto insurance industry,” Norman Williams, California Department of Insurance spokesman, said Wednesday. “Our studies have shown that good drivers are penalized. Lots of rural drivers will get breaks because they”re good drivers.”
“For all intents and purposes, AB 2840 is dead. They voted to hold the bill in suspense,” which Heller explained was because there was a cost involved to do the study, which the state was not prepared to pay for.
“This was a last-ditch effort to block Garamendi from implementing these good driver reforms,” Heller said, “This issue has been before the commissioner for three years now. At any time, the insurance industry could have asked for another study, but they didn”t.
“Finally, good drivers are going to get relief from high insurance rates,” Heller said.
Contact Terre Logsdon at tlogsdon@record-bee.com.
