Well, but Prop 103 passed in CA, no? I remeber receiveing a deluge of letters and phone calls from my insurance agent (State Farm who threatened to leave the state if 103 passes) - and I presume everyone else in CA received the same treatment, but 103 did pass.
For those unfamiliar with CA referenda, 103 was a refrendum on rolling back insurance rates and equalizing premiums between urban and suburban/rural areas. Prop 103 passed over a fierce opposition of insurance industry. After its passage, the industry fought tooth and nail against the rollback provision (and won some concessions), but left the equalization of rates essentially uncontested. But then, why should it fight it? In essence it is a diffrent distribution of premium burden, but it hass little effect on the profit margin.
On those grounds I believe that auto insurance is essentially racist it is "gratuitous" discrimination not 'required' by capitalist profitability.
As far as your individualization of insurance argument is concerned - that may hold for homeowner insurance but not for car insurance. You cannot bring your home to south bronx or west baltimore where it can be more likely (i.e. almost certainly) ripped off, but people routinely drive their cars to the cities where likelihood of accident or damage is much higher than in their suburban backwaters. in fact, most of the vehicular traffic in places like b'more or nyc is suburban - half of the car/suv licence plates seen in nyc are from new jersey. so the risk should be calculated based not on the residence location, but on the likely operation area.
Cherry picking is a form of a "market failure" - that is, a situation when certain types of public goods cannot be produced due to the "free rider" effect (i.e. someone benefiting without paying the full cost). According to neoclassical wisdom, "market failures" are usually corrected by government, which can impose mandatory payments (taxes, levies, etc.) thus preventing free riding. In fact, private insurance companies already do that by adding "uninisured motorist" item to your premium. Well, if the government also provided subsidies for those who are unable to obtain affordable insurance rates for reasons other than their own bad driving record (i.e. by simply belonging to a 'high risk' category), and then charged those subsidies to insurance companies (who'd pass it on all insured) in the form of "hard-to-insure motorist" surcharge - the cherry picking problem could be easily solved, or at least substantially alleviated, no? Of course, I see nothing wrong with those with actual bad driving record paying higher rates.
wojtek