Factors To Set Insurance Rates Change

Different insurance companies have their different factors to determine a person's or a family's insurance rates. For example: Farmers Insurance Exchange has a person's martial status as part of the factors, while Mercury General Corp. focuses more on the person's gender.

California's biggest insurance companies have a diversity of different factors used to determine rates, and no two are exactly alike in how they weight them. This entire system will be changed by California Insurance Commissioner John Garamendi's offer to require participation with Proposition 103.

The 1988 ballot drive focused more on the three mandatory driving-related factors must have the greatest effect on rates: safety record, miles driven and years of experience. Garamendi proposes to focus more on the ZIP code factors which will measure the cost and frequency of accidents and thefts in the specific area.

If his proposal does go through, there's going to have to be a very steep adjustment which in fact, will seriously affect insurance rates. His proposal will actually lower the rates of insurance, especially in Los Angeles. Industry executives, however, think that the plan is wrongheaded "because it would force them to set rates based on factors that may not apply to their customer base'.

Under Garamandi's plan, the changes will start taking effect later this year. This plan could raise a lot of controversy over people. The effect of Garamandi's plan is not yet in affect; if it is, it will lower interest rates for some areas, and increase them in others.