Car insurance pricing to change in California

The pricing of a car insurance is always a sensitive issue. Consumers want to pay as little as possible for their car insurance, but companies that sell it want to make sure that they make money and that the revenue that comes in is sufficient to cover the claims that they will have to pay. One never knows when a disaster such as Hurricane Katrina may show up and suddenly spawn tens, or even hundreds of thousands of claims.

Insurers are currently up in arms in the state of California due to some new regulations that are about to come into effect. Stemming from Proposition 103, a bill passed in the late 1980’s, the new regulations will require that insurers grant more weight to a driver’s years of experience and driving record when assigning rates than they do to where the driver lives. In the past, the Zip code of the driver’s address was more significant in determining pricing than the number of miles the driver puts on the car or his or her driving record. This is changing, and insurers are not happy about it.

The American Automobile Association has already pledged to follow the new regulations, but other companies are not going along so peacefully. A number of court cases are expected as a result of these regulations and it remains to be seen when they will finally go into effect. 

Currently, insurance companies look at nearly twenty factors when determining rates. They are permitted to determine on their own how much weight that each of these factors should be given and they derive their rates accordingly. At the moment, the Zip code of the driver seems to be the most significant factor, and this rankles consumers. There is some correlation between where a driver lives and how likely they are to be victims of auto theft. There is probably less of a correlation between where a driver lives and how likely he or she is to be in an auto accident, although densely populated areas see more accidents on the whole than sparsely populated ones.

In time, this will work itself out. In all likelihood, buyers in urban areas will see a slight decrease in their rates while those who live in outlying areas will probably see their rates go up. Eventually insurance pricing should be just about equal in all parts of the state, which consumer advocates see as quite fair.

All of this, of course, is subject to what the lawyers have to say. The insurance industry is a profitable one, and those who work in that industry are not interested in seeing those profits go away. That being the case, consumers who are expecting to see sudden rate drops when they seek an insurance quote should probably lower their expectations. These regulations are going to be tied up in court for quite a long time to come. In the meantime, consumers are encouraged to do some competitive shopping in order to get the best deal that they can

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