|Thursday, September 16, 1993
State Criticizes Auto Insurers on Pricing Tactics;
Consumers: Garamendi says 'undercover' survey shows
illegal tie-ins. Industry attacks study as flawed.
By: THOMAS S. MULLIGAN
TIMES STAFF WRITER
Can consumers get a reliable price quotation from an auto
insurer over the telephone?
Not likely, says the California Insurance Department.
In an "undercover" phone survey of insurance
agents representing the state's 20 largest carriers,
department employees posing as consumers got prices that
varied widely from the official company rates filed with
The insurance industry quickly attacked the survey as
misleading and statistically flawed. Of 396 quotes
obtained by surveyors, only 75 were within $10 of the
official price, Insurance Commissioner John Garamendi
said at a news conference Wednesday. On average, quotes
were 7% to 15% above the official rates.
Quotes were also hard to obtain, Garamendi said, with
nearly one-third of the agents contacted declining to
offer prices over the phone. Garamendi said he suspected
that by refusing to quote prices, insurers were trying to
get around the "take-all-comers" provisions of
Proposition 103. The 1988 voter initiative requires
carriers to sell insurance to any driver with a good
In criticizing the survey, a spokesman for Farmers
Insurance Group noted that the sample sizes--for example,
48 Farmers agents contacted out of 5,000 statewide--were
too small to draw any valid conclusions. For only three
companies--Allstate, Farmers and State Farm--did the
surveyors obtain more than 20 quotes. One company that
Garamendi praised for its accuracy--Amica
Mutual--provided only three quotes. Also, many of the
agents surveyed were independent and not employed by the
insurers directly. Consumers should expect different
quotes from independent agents because they are competing
against one another for business, said James A. Snyder,
president of the Personal Insurance Federation of
California, a trade group.
Insurance Department spokeswoman Elena Stern acknowledged
that there was no effort to make the survey statistically
valid. Rather than choosing agents scientifically to
ensure a representative sample, the surveyors simply used
listings in phone books and business directories.
"Our goal was to go through what consumers go
through," she said. The survey involved up to 15
staff people making calls over a three-week period, she
said. They posed as consumers trying to get minimum
coverage for a 1984 Chevrolet Celebrity being driven
10,000 miles a year by a 35-year-old person with one
traffic ticket. They gave addresses in Westwood and
Compton as well as in East Oakland and the Oakland suburb
of Alameda. Otherwise, all the information given was
One of the findings turned up in the survey was that some
insurers refused to sell auto insurance unless the
consumer also agreed to buy a homeowners policy.
Garamendi said such tie-ins are illegal. He scheduled
public hearings for next month to investigate further and
said he might subpoena agents to testify.
Descriptors: INSURANCE INDUSTRY -- CALIFORNIA; AUTOMOBILE
INSURANCE; CONSUMER PROTECTION; PRICES
Copyright (c) 1993 Times Mirror Company