Reader’s Question:

I just moved to Los Angeles, CA and I heard from a friend that CA has a new auto insurance pricing system based on driving record, unlike what it used to be which was based on zip code? What does it mean?

Kate

Los Angeles, CA

In CA, auto insurance companies must now set customers’ premiums primarily on driving record and the number of miles driven annually and significantly limit the impact of ZIP Code on rates. For years, drivers in certain neighborhoods paid dramatically more than people living just across the ZIP Code line, because of insurers’ reliance on geography in premium setting.

Auto insurers are required to submit plans that would base policyholders’ premiums based on a driver’s record, the annual miles they drive and the number of years they have been licensed must each have a greater impact on insurance premiums than ZIP Code or such other factors as marital status, which has historically had a major impact on premiums. Therefore, there will still be geographic variation in premiums, but not nearly of the scale described in the examples above. Also, drivers who have historically been overcharged solely because of their address will see the most significant relief.

Tags: auto insurance premium, automobile