California just took another step toward eliminating zip code-based auto insurance premiums.

Barring legal challenge from insurance companies, the rate-setting change will take effect in 30 days.

According to the LA Times, the state Office of Administrative Law gave the green light to a nearly 20-year push to cut zip codes from insurers’ rate setting formulas. State insurance commissioner John Garamendi has led the effort to implement the change.

Advocates of eliminating zip codes have long maintained that location-based insurance rates are discriminatory toward minority and low-income Americans. Further, supporters say, zip codes have little to do with claims risk.

“This is very good news for good drivers wherever they may be in California, rural, suburban or urban,” Garamendi told the Times.

Auto insurers aren’t so sure, saying the regulation will likely cost consumers in the end, particularly those who live in rural areas and spend more time on the road.

The change is an outgrowth of Proposition 103, which calls for driving record and number of miles driven to be the most important criteria in setting insurance rates.

It will be interesting to see what happens to auto insurance premiums in California if the rule takes effect. The state’s fourth largest insurer, the Automobile Club of Southern California, has already voluntarily implemented the change, and they say eliminating zip codes from the mix will trim $133 million from the bills of the club’s 1 million policy holders.

Insurers, however, often say that freedom in calculating claims risk is integral to keeping premiums low. Mandates that curtail that freedom, while often lucrative for politicians, often just result in higher rates for consumers, they say.

On the other hand, if the Automobile Club of Southern California is able to stay in the black and provide reasonable rates for consumers, the heal-dragging of the other carriers in the state will start to look disingenuous.