The only insurer to drop its resistance to the California insurance commissioner's directive to limit the use of geographic location to set auto policyholders' rates said it did so because of a good loss experience.

Alice Bisno, vice president of government affairs for the Automobile Club of Southern California, offered little detail on the company's decision to break ranks with the state's other auto carriers, who have threatened to fight the regulatory change in court.

“We can do it and it is in the best interests of our customers,” said Ms. Bisno. She credited policyholders' responsible claims as a major reason that 88 percent of Automobile Club policyholders are seeing either stable or decreasing policy rates.

Before the new regulations, she said location was “probably the number one factor” in determining rates. The company's business does not cover the entire state. The Automobile Club is the state's fourth largest auto insurer.

The new regulations promulgated by Commissioner John Garamendi are aimed at fulfilling the mandate of Proposition 103, which requires rates to be tied directly to driving record, frequency of use and number of years driving.

Norman Williams, a spokesman from Mr. Garamendi's office, explained that while a few leading insurance companies have threatened to sue; it is “difficult to argue that the regulations will do the harm that they believe.”

Mr. Williams noted that the Automobile Club, in addition to revising its rating factors, was able to give its 1 million customers a 7 percent premium decrease.

This will save customers an average of $134 per year, according to the department.

However, noted State Farm Insurance representative Bill Sirola, whose company opposes the regulation, “There is no question that territory–where your car is driven and garaged–is a very accurate indicator in the cost to insure.”

State Farm is reviewing all the actions they could take to stall the “hasty” passage of the proposal, as well as the possible options and outcomes, according to Mr. Sirola.

Insurers have only 30 days to submit new rating plans to Mr. Garamendi's office. They will have two years to implement the changes, according to his department.

The support of the Automobile Club, amidst all the hostility of the rest of the industry, is a “welcome change” which “validates” the commissioner's regulations, said Mr. Williams.

Special Reports /

Only One Insurer Accepts Garamendi Directive

Related Stories

Recommended For You