According to the commissioner, he wants to fulfill the intent of voter-enacted Proposition 103 and to establish fairness and equity in automobile insurance rating system that has engendered controversy since the proposition took effect in 1988.

"When Proposition 103 was approved, it dealt with the basic fairness of how automobile insurance rates are set in California," Garamendi said. The proposition created three mandatory factors on which auto rates had to be set: driving record; how many miles driven; and how long the person has been driving.

However, shortly after the proposition passed, a new insurance commissioner, Chuck Quackenbush, allowed 16 optional factors to also be used when setting auto rates. Whether or not it was the intent, those optional factors were allowed to have more weight than the mandatory factors, Garamendi said. That lead to "irrational rates in all areas across the state," he said.

"For 17 years there have been competing interests fighting over the use of ZIP codes in the pricing of auto insurance in our state," Garamendi added. For example, in the Rockbridge area of Oakland, someone living on the west side of Broadway could pay rates 50 percent higher than a driver living on the east side of Broadway, he provided as an example. Similar examples can be found all across the state. "There's no logic and no fairness to that," he said.

Thus, Garamendi said he will propose draft regulations so that the 16 optional rating factors cannot have more weight than the three mandatory factors set in Proposition 103. A formal hearing is scheduled for Feb. 24. Garamendi said he expected the regulation process to be completed by July 2006, with implementation by insurers in 2006.

"We're not changing any of the optional factors. We're simply saying that their weight cannot be more than the 3 mandatory factors," Garamendi emphasized.

Michael Gunning, vice president of the Personal Insurance Federation of California, whose members represent 50 percent of the state's automobile insurance market, said he has not yet seen the official regulations since they have not yet been published, but some of the group's members have met with Garamendi where he explained his intent and they could discuss concerns.

"Everything is a guess at this point because we haven't seen the regulations," Gunning said, "but when you try to suppress rates in urban areas, insurers have to raise rate in rural areas, so this could have the effect of raising rates in some areas. We'll be in a better position to say how this will affect rates in a couple of weeks," he said.

Garamendi said the impetus for the regulations were several proposals by the cities of Oakland, Los Angeles and San Francisco, consumer groups, and a two-year study the department took to evaluate the issue.