The California Department of Insurance, having identified a disparity, has established a worthy goal of expanding auto insurance discounts to more low-income consumers and communities of color.
But as it pursues that goal, the department must keep in mind a foundational principle in healing problems: Do no harm.
Rather than expand discounts to more Californians, the department’s proposed regulations would actually eliminate group discounts for millions of consumers – increasing insurance costs by hundreds of dollars a year.
The fact is that California law already strongly protects against discrimination in setting auto insurance rates.
Problems aren’t fixed with solutions that do harm. Insurance Commissioner Ricardo Lara could best serve all California consumers by fixing the proposed regulations so that they don’t increase insurance costs for millions of drivers.
“Affinity” group discounts in auto insurance have existed for decades and are offered to members by various organizations such as labor unions, trade associations, and non-profit groups. They were approved by California voters who passed Proposition 103 regulating insurance rates.
Millions of Californians – teachers, paramedics, seniors, small-business owners, hotel workers, and others – take advantage of these programs to stretch their budgets by lowering their insurance premiums. The savings can amount to hundreds of dollars a year per consumer.
At Lara’s direction, the department analyzed insurance company data to determine the rates at which Californians are accessing these savings. It found consumers in low-income communities are significantly less likely to participate in these programs than those in other areas.
The department’s response has been to propose regulations that would virtually end these discounts – a non-solution that purports to address the disparity by harming millions of California drivers without demonstrably benefitting anyone.
The fact is that California law already strongly protects against discrimination in setting auto insurance rates. It prohibits red-lining, or the practice of factoring zip codes into rate-setting formulas, and establishes a person’s driving record, years of driving experience and miles driven each year as the key factors in determining rates.
Several organizations with strong ties to minority communities have argued for the need to maintain these discounts.
These group benefits provide discounts on the margin. The data show they are actuarily sound: The Department’s analysis determined that those who participate are slightly more likely to have good driving records than those who do not.
The healthy solution is to act, through outreach and education, to expand access to these discounts so that they become more commonly available in low-income communities. Other avenues should also be explored to lower insurance premiums in these communities.
As the department has considered this issue, several organizations with strong ties to minority communities have argued for the need to maintain these discounts. Organizations such as the California Hispanic Chambers of Commerce, the California Black Chamber of Commerce and the Southern Christian Leadership Conference have all opposed these regulations because they will hurt, not help, communities of colored and disadvantaged communities.
To eliminate group discounts would simply punish the millions of working Californians who now participate.
At a time when government entities at all levels are focused on providing support to working families still struggling to get through this pandemic, the Department of Insurance should not embrace the opposite approach by taking money from their pockets.
To eliminate group discounts would only do harm. It is not a solution to anything.
Editor’s Note: The Rev. Dwight Williams is Pastor and President of New Genesis Ministries in Stockton.