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Political Firefight Over California Auto Insurance Rates

May 9, 2006

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California Insurance Commissioner John Garamendi says the insurance industry has launched a campaign of "political blackmail" against him, as part of its campaign to detail Garamendi's revised auto insurance pricing program, intended to reward good drivers and create a fairer system for the pricing of auto insurance.

Garamendi, who is among the candidates for lieutenant governor in the June primary election, said he was told that insurance companies were putting up the funds for a $2 million attack campaign against him.

A coalition calling itself "Californians to Stop Unfair Rate Increases," sponsored by State Farm, Farmers, Allstate, Safeco and 21st Century insurance companies, confirmed that it is launching a $2 million campaign to "educate residents about proposed auto insurance regulations that will unfairly raise rates for millions of drivers statewide."

Garamendi has written to the FBI, the the U.S. Attorney's Office, and the California Attorney General asking them to investigate the insurance industry's alleged attempt to derail the implementation of new auto insurance regulations.

The new rules would require insurers to comply with Proposition 103 and give greater weight to how people drive than to where they live. The insurance industry vehemently opposes the change.

The insurance companies say the changes will mean that while rates may drop in urban areas such as San Francisco and Los Angeles, they are likely to rise in the more rural parts of California, where accidents are less common.

More than 60 county supervisors, city council members and business groups, most from rural communities, have supposedly joined the insurance companies in fighting the new regulations.

Garamendi contends the new rules will make auto insurance pricing fairer.

"They will reward those who drive safely in rural as well as urban areas. And they will put an end to the unfair insurance industry practice of charging a good driver who lives in one zip code more than a good driver who lives across the street in another zip code," he said.

Garamendi, a Democrat, is running in a three-way primary for his party's nomination for lieutenant governor.

"I firmly believe that this amounts to a serious attempt to blackmail me in my role as California's elected Insurance Commissioner. Clearly I was offered a significant advantage. If I abandoned my responsibilities and delayed implementing the will of the voters, I would not be hit by a $2 million negative advertising campaign in the final weeks leading up to the June election," he said.

"They mistakenly believed that I would consider the outcome of the next election to be more important than my obligations as Insurance Commissioner. They were dead wrong," Garamendi vowed.

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