Steadfast Believer in Numbers

In World War II, he navigated a B-17 bomber through 50 combat missions. After the war, he earned a degree in mathematics and physics from Harvard. And the company he launched in 1962, Mercury General Corp., pioneered the use of ZIP Codes and other data in fine-tuning auto insurance rates.

So when California Insurance Commissioner John Garamendi recently announced plans to overhaul the way car insurance is priced -- making motorists' driving records the No. 1 factor -- it was almost as if he had proposed making two plus two equal five, at least to Joseph's way of thinking.

Insurance rates should be based on the statistical chances of a customer's filing a claim, the 84-year-old Joseph believes. Armed with years of empirical evidence, Mercury and most of the state's other insurers have concluded that the best way to calculate those odds is to look at where a driver lives -- specifically, his or her ZIP Code.

"People in rural and suburban areas will be forced to subsidize people in heavily urbanized areas -- that's my concern," the Los Angeles billionaire said of Garamendi's proposal. "Would it be fair for people in Burbank to pay more so that people in Beverly Hills can get lower rates?"

Consumer advocates say, however, that the Mercury approach defies not only fairness but also the law. Proposition 103, the 1988 auto insurance initiative, declared that rates should be based mainly on three factors: driving record, how many miles people drive and years of experience, in that order.

By homing in on ZIP Codes, insurers keep rates high for poor people and members of minority groups, who live disproportionately in congested neighborhoods, consumer groups assert. Moreover, they say, the current system punishes good drivers who happen to live in densely populated areas.

"You move from one side of the street to the other, and suddenly you have to pay more? That's nonsense," Garamendi said. "Rates should be based on how you drive, not where you live."

Chuck Quackenbush, one of Garamendi's predecessors as insurance commissioner and a friend to the industry, adjusted the ranking factors in 1996. Garamendi hopes this year to restore what he sees as the intent of the landmark 1988 law.

Shortly after Garamendi unveiled his plan in December, Joseph prepared to launch an initiative campaign with two goals: to thwart Garamendi's effort and to allow discounts for drivers who maintain continuous insurance coverage, even through different carriers.