The State of Wisconsin is joining the large list of U.S. States that requires drivers to own car insurance. But unlike California, New York, Washington, and many others Wisconsin is also initiating legislature that governs the insurance companies themselves. Senate Bill 289, initiated by Democratic Senator Tim Carpenter, would prohibit insurance companies from using policy holders' zip codes as a factor in determining their car insurance rates.
The proposal has sparked a lot of controversy primarily among insurance company lobbyists who claim that zip codes are an important factor in determining car insurance rates. The insurance companies argue that the legislature will serve only to redistribute premiums. Others see it differently. Proponents of the measure claim that using zip codes as a factor in determining premiums, especially in densely populated areas with large zip codes, is biased, unfair, and can work against claimants who may share a zip code with less desirable, higher risk neighborhoods miles away from their own.
It's no secret that insurance companies use many seemingly insignificant factors to determine insurance rates. Things like age, sex, race, whether or not a claimant smokes, and even the color of the automobile itself are all factors in calculating the rate of an individual's car insurance premium. For example, a 22-year old Asian woman who smokes, drives a red 1988 Camaro, and lives in Milwaukee's notorious North Side will pay a significantly higher premium than, say, a 39 year old white male who doesn't smoke, lives in Fox Point, and drives a 2008 Lexus. On the surface the rate determination would seem racist, sexist, and biased, but is it? The statistics, collected over years, studied, and calculated by the insurance companies themselves are the bottom line for determining rates on an individual car insurance policy. So why then is the Wisconsin State Legislature singling out the zip code factor as an issue?
It's not entirely unlikely that Senator Carpenter himself has been on the receiving end of the so called zip code persecution. Or maybe, in the spirit of the new Socialistic political climate, it is merely the first instance of a larger effort to level the playing field for those less fortunate than the nation's richest one percent. In either case, insurance companies don't like it, which is a positive indication that it's probably a good thing for almost everybody else.