California Insurer Complies with New Insurance Directives, Others Balk

By William Murphy

Published on August 09, 2006

The new regulations require insurers to base policy rates on drivers' accident history, years of experience, and yearly mileage rather than on ZIP codes, as had been common practice. The regulations were written by Insurance Commissioner John Garamendi based on the 1988 voter-approved initiative Proposition 13.

In addition to altering the way it sets rates, USAA filed to reduce policy prices an average of 5 percent beginning in November of this year. The Automobile Club of Southern California made similar filings in July, but requested a 7 percent cut in rates from December.

The insurance industry has battled the regulation changes from the beginning, arguing that some suburban and rural customers could see their rates jump by as much as 30 percent. The insurance industry will attempt to block the regulations in a Sacramento state court on August 9.

An industry spokesperson has accused Garamendi of timing his announcement of USAA's filing to sway the court. Garamendi countered that the USAA filing provides proof that compliance with the new regulations will have little adverse effect on insurance companies.

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