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State Criticizes Auto Insurers on Pricing Tactics : Consumers: Garamendi says 'undercover' survey shows uneven quotes, illegal tie-ins. Industry attacks study as flawed.

September 16, 1993|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 department.

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 record.

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 identical.

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.

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