California’s state department of insurance now has a new set of rules that makes it harder to base vehicle insuranc premium rates on what zip code the car is parked in. Right now in California, most of the factors that car insurance companies can use to determine the vehicle insurance rate are things that the drivers can change, such as the safety rating of their vehicle or their driving history. Zip code falls in with the widespread but a little more fishy factors that also include gender and whether or not the driver is married.

Zip codes currently have a big effect on a person’s auto insurance premium, and the new rules set by the state commissioner will change that. According to the new set of regulations, there will be three main factors when it comes to deciding what the price for vehicle insurance should be, and those factors are:

• mileage
• driving record
• experience

Companies can use factors besides just these three, but they will have to have a lot less of an importance on the final decision.The law was brought about by voter demand. Several different groups have been making trouble for the past twenty years over whether or not it’s okay to use zip codes as factors in vehicle insurance quotes, and the commissioner said that it would be a lot better for everyone to just put an end to all of it and clear up there by making things more understandable.

It took a couple years of looking over different methods of how to work the importance of the zip code out of the insurance factor process before they finally decided on which way would be the best. The decision ended up being that it was better to allow it to still be used to some extent, but as a secondary factor. Under California law, the secondary factors cannot have as much effect on the rate as can any of the primary factors. This was because people believe that zip codes were given an unfair weight and more important than options like car safety.

State Farm doesn’t see the good in it. According to that company, the use of the zip code actually did good for most of the state of California. After the new laws are put in place, California vehicle insurance will cost more in eight out of ten counties state wide. Allstate was in agreement with this. In their company, it may be that forty percent of California drivers will see a decrease in price, but the other sixty percent could actually see a significant increase now that zip codes are out of the question.

However, the state consumers union claimed that the use of zip codes were used for purposes of discrimination. The basis of these claims comes from the fact that zip codes in which the majority of the residents were black or Hispanic got charged a lot higher on their vehicle insurance premiums than the zip codes that were predominantly white. These zip codes paid almost twice as much as the white communities. These groups claim that the practices are ridiculous, and that vehicle insurance rates should be based on how well a person drives and nothing else.

Cheers,

Fashun Guadarrama.