Wolk advocates fair insurance rates for local drivers

Measure requires auto insurance rate calculation changes be studied before they take effect

SACRAMENTO–Assemblywoman Lois Wolk (D-Davis) today joined a bipartisan group of five legislators at a news conference to support legislation requiring proposed changes to the present auto insurance rating formula be evaluated before they are allowed to take effect. Local elected officials including Dixon City Councilmember Mike Smith also attended the event.

Assembly Bill 2840 (Benoit) would require that any proposed changes to the way auto rates are calculated be independently studied by the California Research Bureau before those changes could be enacted. The legislation, coauthored by Wolk, was introduced in response to a proposal by Insurance Commissioner John Garamendi that would raise the rates of drivers in lower-risk areas of the state, including Yolo and Solano Counties, to subsidize cuts in higher-risk areas of the state such as Los Angeles.

“I believe rates charged for auto insurance should be based on the actual risk, and distributed fairly,” said Wolk, a long-time opponent of Garamendi’s proposal. “Drivers in lower-risk areas of the state where claim frequency is less should not be required to subsidize drivers in higher-risk areas.”

The cost of auto insurance is calculated based on driver characteristics such as driving record, annual miles driven and driving experience, as well as other factors including claim frequency and claim severity in a given region. At the crux of Garamendi’s proposal is a change to the rating formula to reduce the calculation of cost factors related to a driver’s place of residence.

Under the Insurance Commissioner’s proposal, 63 percent of so-called “good drivers” would receive rate increases. Meanwhile, 56 percent of California “bad drivers” (drivers who fail to meet good driver criteria) would receive rate decreases. Drivers who live in areas with less traffic and lower crime rates would see their rates increase significantly. Most drivers in Solano and Yolo Counties could see rates increase between 7 and 15 percent.

“While I appreciate the Commissioner’s desire to reduce rates in urban areas, I remain concerned that the proposed changes would come at the expense of rural and suburban drivers, many of whom have no alternative means of transportation,” said Wolk. “I believe independent study is needed so we can be sure no unfair negative impacts on drivers who can least afford it.”

“This would hit hardest those low-income drivers who are already struggling to pay their auto insurance. There are too many uninsured drivers on the road, many of whom simply can’t afford insurance. We need to expand the California Low Cost Automobile Insurance program to provide low-income coverage to eligible, good drivers.”

In April of 2004, Wolk held a town hall meeting attended by the chair of the Assembly Insurance Committee, Juan Vargas, and a representative from the Insurance Commissioner’s office, to provide Solano and Yolo County residents an opportunity to hear details of the proposal and to raise questions and concerns.

According to a study commissioned by the state Department of Insurance and conducted by the actuarial consulting firm Mercer Oliver Wyman, the Insurance Commissioner’s rate adjustments could increase rates throughout Solano and Yolo County:

• 6 to 12% in Benicia
• 10 to 18% in Davis
• 7 to 16% in Dixon
• 2 to 11% in Fairfield
• 6 to 14% in Rio Vista
• 4 to 10% in Suisun City
• 5 to 15% in Vacaville
• 4 to 13% in Winters
• 5 to 16% in Woodland