It has been a common practice of auto insurance companies to use location as a factor in determining auto insurance rates. According to the article “Proposal would eliminate ZIP codes as factor in Wisconsin car insurance rates” by Paul Gores of the Journal Sentinel, WI state legislature wants auto insurance companies to stop using zip codes.
Some of the Democratic legislators have brought this plan back despite a similar plan being vetoed by Gov. Jim Doyle back in June. Auto insurance rates can be up to 60% higher in areas that are heavily populated. This may seem unfair for those living in urban areas, but the auto insurance companies claim it is part of mitigating risk. The current system gives higher rates to those in bigger cities because more theft, accidents and vandalism generally occurs in these areas.
The auto insurance companies also point out that if zip code was not allowed to be a factor, rates would increase substantially for those living in rural areas. There would simply be an overall redistribution of premiums. Auto insurance companies look at many different factors including driving record and credit score. The Governor will have to review this bill and see if it will be considered.
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