Calif. Palo Alto Groups Lose Bid to Break from ZIP Code for Auto Rates

Several hundred California residents who say they’re paying too much for car insurance tried and failed to convince the U.S. Postal Service to allow them to migrate to a ZIP code where insurers charge cheaper rates.

The Palo Alto residents argued they were unfairly paying too much because they share a ZIP code with the neighboring city of East Palo Alto, where rates are often higher because of increased accidents and break-ins, community organizers said.

The state requires insurers to base rates mostly on a driver’s safety record, miles driven and years of experience, but it also allows them to consider ZIP codes.

Two neighborhood groups asked the Postal Service to allow them to join other Palo Alto ZIP codes or create their own.

But their request was turned down because it would be too costly to adjust postal boundaries for reasons other than speeding mail delivery, Rep. Anna Eshoo, D-Palo Alto, who handled the request, said in a letter last week to community organizers.

Instead of appealing the decision, the groups said they will now work with city officials to change the way insurers set rates.

In hindsight, some organizers said they became concerned that a ZIP code change would give the impression they were trying to divide the communities by race and class. Palo Alto is mostly white and wealthy, while East Palo Alto is largely minority and poor.

“My intent is not to say I don’t like East Palo Alto,” said Arthur Keller, president of the Adobe Meadow Neighborhood Association. “It’s a bread-and-butter economic issue.”

State Insurance Commissioner John Garamendi has proposed new regulations that would force insurers to limit the use of ZIP codes in setting rates. A public hearing is scheduled for Feb. 24 in San Francisco on the proposal.

“The cost of auto insurance should be based on how you drive, not where you live,” Garamendi said.