State may limit auto in­surance dis­counts

Antelope Valley Press - - News -

SACRAMENTO (AP) — Cal­i­for­nia is propos­ing to re­strict auto in­surance prac­tices that reg­u­la­tors say ben­e­fit those who have more money, more ed­u­ca­tion and are white.

The state De­part­ment of In­surance pro­posed reg­u­la­tions Mon­day that would pro­hibit in­surance com­pa­nies from us­ing so-called “affin­ity groups” to dis­crim­i­nate based on ed­u­ca­tional at­tain­ment or in­come level, among other fac­tors.

The bulk of driv­ers in the groups al­ready fall into lower in­come cat­e­gories, re­sponded one in­surance as­so­ci­a­tion, while an­other warned that the change could have the un­in­tended ef­fect of harm­ing work­ing-class Cal­i­for­ni­ans. The Amer­i­can Prop­erty Ca­su­alty In­surance As­so­ci­a­tion said sim­i­lar dis­count pro­grams are of­fered in 48 states.

A bal­lot ini­tia­tive ap­proved by Cal­i­for­nia vot­ers in 1988 barred “redlin­ing” or other forms of in­surance dis­crim­i­na­tion that of­ten meant the least wealthy driv­ers paid the most for in­surance.

Yet the de­part­ment’s in­ves­ti­ga­tion “found that many in­surance com­pa­nies were ef­fec­tively us­ing group dis­counts to ‘cherry-pick’ mem­bers, giv­ing some higher-in­come oc­cu­pa­tions a ‘fast pass’ while peo­ple of color and lower in­come mo­torists were left in the slow lane,” In­surance Com­mis­sioner Ri­cardo Lara said in a state­ment.

He said the pro­posed reg­u­la­tions to be con­sid­ered next year would con­tinue to al­low the group dis­counts based on oc­cu­pa­tion and ed­u­ca­tion, but only if they are jus­ti­fied and don’t dis­crim­i­nate.

A quar­ter of Cal­i­for­nia driv­ers re­ceive affin­ity group dis­counts rang­ing from 1.5% to 25.9%, de­pend­ing on the in­surance com­pany and the group, the de­part­ment said.

But those liv­ing in ar­eas with av­er­age in­comes above $49,000 are more than twice as likely to re­ceive dis­counts as those in ar­eas with av­er­age in­comes of $22,500 or be­low, the de­part­ment found. It found par­tic­i­pa­tion in group dis­count pro­grams could be three- to four-times higher in higher in­come ZIP codes in some ar­eas of Los An­ge­les, San Diego, and the San Francisco Bay Area.

Driv­ers be­long­ing to the groups are more likely to be in ar­eas with mainly white pop­u­la­tions, the de­part­ment said. It said only about a quar­ter of those in ar­eas with low num­bers of col­lege de­grees re­ceive dis­counts, com­pared with more than half of those in ar­eas with high num­bers of col­lege grad­u­ates.

“To have th­ese iden­ti­fied as tools of re­pres­sion is very frus­trat­ing,” said Per­sonal In­surance Fed­er­a­tion of Cal­i­for­nia Pres­i­dent Rex Fra­zier, par­tic­u­larly when he said the de­part­ment’s data doesn’t seem to bear that out.

“Their own study showed that over 70% of the driv­ers in affin­ity groups made less than $50,000 a year,” he said. “If they’re go­ing to make it harder to ac­cess affin­ity groups ... does this dis­pro­por­tion­ately af­fect lower in­come driv­ers?”

Amer­i­can Prop­erty Ca­su­alty In­surance As­so­ci­a­tion Vice Pres­i­dent Mark Sek­t­nan said in a state­ment that his group is sim­i­larly con­cerned that “th­ese pro­posed changes will elim­i­nate a dis­count auto in­surance pro­gram used by mil­lions of Cal­i­for­ni­ans strug­gling to keep up with the ever-in­creas­ing high cost of liv­ing in Cal­i­for­nia.”

In­sur­ers would still be able to of­fer dis­counts to groups such as those made up of mem­bers of the Cal­i­for­nia Teach­ers As­so­ci­a­tion or AARP, said Con­sumer Fed­er­a­tion of Amer­ica in­surance ex­pert Doug Heller.

“It’s the rat­ings scheme that some com­pa­nies have used that slice and dice driv­ers based on their job ti­tle and level of ed­u­ca­tion that will be blocked by this rule,” Heller said.

Con­sumer Watch­dog and 10 civil rights and pub­lic in­ter­est or­ga­ni­za­tions had wanted reg­u­la­tors to go far­ther by en­tirely ban­ning the prac­tice, which they said can cost some peo­ple with lower in­comes or ed­u­ca­tion hun­dreds of dol­lars a year.

“The devil’s go­ing to be in the de­tails whether th­ese tighten the rules enough,” Con­sumer Watch­dog Pres­i­dent Jamie Court said.

The prac­tice “is a sur­ro­gate for race-class-eth­nic­ity, and this rule tries to de­moc­ra­tize the prac­tice so that all groups are get­ting a break on their rates if they can prove they have a bet­ter loss ex­pe­ri­ence,” he said.

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