Auto insurance rates in California have to be based primarily on a motorist’s driving safety record, the number of miles you drive each year, and how many years you’ve been on the road. That’s one of the mandates of insurance reform Proposition 103, approved by California voters in a David versus Goliath battle with the insurance industry twenty-five years ago. Insurance companies are allowed to consider other factors… but only if the company can show, in a public hearing, that they are “substantially related to risk of loss” and put on an “approved” list by the elected Insurance Commissioner. Even then, optional factors can never outweigh a person’s driving record, annual mileage and years of driving experience on their insurance bill.
It’s a system designed to make insurance rates fair, reward good drivers, and eliminate the discrimination against the middle class and the poor that was rampant in the 1980s.
Insurance companies are always looking for ways to evade Proposition 103, and they have come up with a scheme to evade the law’s good driver requirements. These days, some insurance companies are marketing plans that promise lower premiums to people who belong to what the insurance industry calls “affinity groups” – college graduates who can afford to maintain memberships in an alumni association, people with high paying jobs like doctors, lawyers, and business executives, and other elite members of the 1%.
Guess who gets penalized under this system? Regular people who work middle class or blue collar jobs; high school graduates; retired citizens and those on low incomes. Even if they are Good Drivers, they are forced to subsidize the rich – but not necessarily good drivers – that insurance companies like better.
These so-called “affinity groups” violate Proposition 103. Unfortunately, the California Department of Insurance, which is responsible for the enforcement of Proposition 103, has allowed a number of insurance companies to market the policies. The agency’s failure to stop these illegal surcharges is even more problematic because a court recently decided that consumers can’t later challenge a company’s illegal rating practices in court if they have been included in a filing approved by the Commissioner – a decision that itself conflicts with Proposition 103.
In a current challenge brought by Consumer Watchdog to “affinity groups” proposed by Allstate, an Administrative Law Judge has raised serious questions about their legality. We’ve asked the Department of Insurance to join us in opposing Allstate’s and other companies’ proposals. Consumer Watchdog believes that the best forum for resolving this issue is through a regulation, issued by the Insurance Commissioner after public hearings, that would address the problem industry-wide. We’ll let you know what happens.