A new bill moving through the state Senate would take ZIP codes out of consideration when insurance companies determine auto insurance rates.
The bill, authored by Sen. Tim Carpenter, D-Milwaukee, would not allow insurance companies to use where policyholders live to determine how at-risk their automobiles are.
Under the new bill, an insurer may use the driving record of an applicant, the length of time they have been driving and the number of miles the vehicle is driven in a year when determining a rate.
Currently, there is a law that specifies general criteria on which insurance rates may be based, and risks may be classified in any reasonable way except based on race, color, creed, or national origin. Classifications in automobile insurance also may not be based on physical condition or developmental disability.
Rep. Leon Young, D-Milwaukee, said he co-sponsored the bill because people need insurance and it is not fair to those who live in heavily populated areas to have higher premiums while those in rural areas pay less.
According to Young, a similar measure was included in the 2009-11 biennium budget, but Gov. Jim Doyle vetoed it.
“I hope he doesn’t veto it a second time around,” Young said. “Basically, we are just trying to make insurance rates fair for all.”
Young responded to criticism from insurance companies who say if the measure passes, some people’s rates will go up and some people’s will go down by saying it provides more balance.
Steve Witmer, spokesperson for Madison-based American Family Insurance, said the ZIP code rating is an important part of determining proper amounts for people to pay for insurance.
“Where you live, even for auto, has a real bearing on the likelihood for having a claim,” Witmer said. “Some areas, depending on traffic and amount of theft in the area, have different experiences for claims, and we feel it’s a traditional part and helps determine a person’s fair share for premiums.”
Witmer also said the company has representatives who attend public hearings and said they closely monitor bills and take positions that serve customers best.
Rep. Robin Vos, R-Racine, a member of the Assembly Committee on Insurance, said the bill is unreasonable because rural residents should not pay as much as someone who lives in a densely populated area.
“Where I was born and raised in Burlington, you could leave your car unlocked and the keys in (the) ignition,” Vos said. “Cities like Madison and Milwaukee, however, are not safe.”
Vos said it makes sense for insurance companies to use ZIP codes because insurance is rated on whether or not you will turn in a claim, and urban areas are more prone to incidents than rural areas.
“This is an example of people who propose a bill being shortsighted,” Vos said. “There is no rationale except rewarding those who live in better areas with higher premiums while those who live in areas where cars can be stolen will pay lower premiums.”
