If your insurer is using your zip code as a primary factor than no, under prop 103 they should not do so and should be changing their rating system in the near future to abide by California insurance laws.

California Proposition 103, which was enacted in 1988, established uniform guidelines upon which your CA auto rates would be determined. The primary factors are as follows:

• The operator’s driving safety record;
• The number of miles driven annually;
• The number of years of driving experience.

There are 16 secondary rating factors which may be used in any combination to determine your specific rates and calculate your individual premium based on an insurance company’s filing with the California Department of Insurance (CDI).

The secondary factors must not be weighted as heavily as the primary factors in the rate premium calculation. These secondary rating factors may include marital status, frequency and severity of claims in the geographic area where your car is garaged, gender, vehicle type, etc.

In 2006 the Office of Administrative Law (OAL) has approved Insurance Commissioner John Garamendi’s regulations requiring insurers to place more weight on how safely you drive than on where you live when setting rates. The current Insurance Commissioner believes this was the hope of voters who passed the Proposition 103 back in 1988.

The former Insurance Commissioner, Chuck Quackenbush, allowed insurers to place greater importance upon other factors, such as marital status, gender, and most frequently, ZIP code. This system permitted insurers to charge widely varying rates to similarly situated drivers who live across the street from one another, based solely on their respective ZIP Codes.

Insurers were given a two-year phase-in period to fully implement their plans and conform with these new regulations (from 2006), though they must show significant progress during the first year. Until now, insurers have been able to set rates based primarily on Zip codes or other optional factors, rather than on the three mandatory factors of Prop. 103: driving record, annual miles driven and driving experience.

In the spring of 2008 news sources were discussing the judgment that required Allstate to lower rates and other insurance companies need to start conforming to the Prop 103 rating factors. On April 6, 2008 the LA times had an article that discusses the auto insurance situation in California.

Here it spoke about how former California Insurance Commissioner John Garamendi announced in 2005 that he was enforcing prop 103 and requiring insurers to stop using ZIP Codes as a main factor in determining insurance rates for motor vehicles.

The regulatory change is finally supposed to go into effect on July 14, 2008. According to the CA DOI the majority of car insurers in California have yet to fully comply. As of March 2008 the DOI reported that only 46 insurers were in full compliance, while 200 other insurance carriers were not. They did state that some insurance companies, like Allstate and Geico, were relatively swift to make ZIP Codes a secondary consideration in setting rates.

The insurance reforms related to Prop 103 have not fully been fully implemented previously due to being held up for years by challenges from the insurance industry, which argued that the changes would cost it millions of dollars and unfairly discriminate against people in rural areas.

Some say the implementation of Proposition 103 continued to be delayed by a succession of industry-friendly state insurance commissioners but changes began with Commissioner Garamendi, who made Proposition 103 a priority. Once the regulation was finally adopted in 2006, insurers were given a two-year grace period in which to bring their rates into compliance as we mentioned earlier and that time period is nearly up.

As of July 2008 California motorists should see a change with those insurance companies that have kept your zip code as a primary rating factor. Consumers are hoping to find unusually competitive rates as auto insurers start quoting policies that truly reward people with good driving records.

You should discuss the Prop 103 issue with your AAA insurance agent and see if he or she states that your zip code is still being used as a primary factor and if so when their practices are going to change. If you have more consumer questions about Prop 103 and your insurance carrier or CA car insurance rates in general contact the California Department of Insurance for consumer advice.