CFC opposes AB 2800 because it raises serious privacy concerns and would amend voter approved Prop 103

The Consumer Federation of California opposes AB 2800 (Huffman). The bill’s objective - providing financial incentives for motorists who reduce their driving - is worthy. AB 2800 is an improper attempt to re-write a voter approved ballot measure. The bill also raises serious consumer privacy concerns.

AB 2800 would amend the mandatory insurance rating factors approved by the voters in 1988 as part of Proposition 103.  Proposition 103’s proponent, Consumer Watchdog (formerly the Foundation for Taxpayer and Consumer Rights) worked for many years to win Department of Insurance regulations to implement the intent of the Proposition 103, which among other rating factors, was designed to reward drivers with reduced insurance premiums for driving less. DOI rules to implement these provisions were adopted in 2006 and are only now taking effect.

Proposition 103 requires insurance companies to base the auto insurance rates charged in California primarily on a motorist’s 1) driving safety record, 2) annual miles driven and 3) years of driving experience.  Proposition 103 grants the Insurance Commissioner the authority to establish insurance rates through a ratemaking process, provided the rates are designed to further the intent of Proposition 103. The legislature has no authority to set rates under Proposition 103.

In 2006, then-Insurance Commissioner John Garamendi enacted new regulations to enforce the annual mileage factor and require insurance companies to restructure their auto insurance rates to fully comply with the voters’ mandate.  At the same time, Commissioner Garamendi promulgated new rules to make it easier for insurers to verify the actual miles driven by their policyholders.

The bill would create an unfair system of insurance discrimination in which similarly situated policy holders would pay different prices.  Under AB 2800, an insured who participates in an insurance company’s  optional “green” plan would pay a lower insurance rate than a similarly situated policy holder who drove an identical number of miles but who did not participate in the same insurance company’s “green” plan.  If every other factor about the policy holders is the same, the fact that one is not a participant in a program would unfairly result in a higher premium under AB 2800.  

Under the current rules, insurers can offer real incentives for realistic mileage reductions.  As long as the insurer continues to prioritize the impact of a driver’s safety record, nothing would stop an insurer from offering their insurance product as a legitimately Green Auto Insurance policy.  

In order to facilitate insurers’ ability to confidently assess the risk associated with a customer’s mileage, DOI regulations grant insurers the authority to require customers to provide an odometer reading when the mileage verification rules were revised.  Insurance companies were also given the authority to request, but not mandate, that customers comply with certain mileage verification requirements including the technological GPS devices contemplated in your bill.

As amended, AB 2800 removes direct references to GPS monitors, however it would allow insurance companies to require drivers to use technological devices in their cars, or pay a higher rate if they refuse. The mileage program is nominally “voluntary,” but its permissive language would result in mandatory GPS monitoring, since a driver would be forced to pay more if he or she did not participate. There is no language in the bill limiting the information that an insurer may collect from a GPS device. This raises significant privacy concerns regarding collection of data on consumers’ driving habits, destinations and other information that is not germane to the objective of verifying the total miles driven.  

The proper venue for modifying automobile insurance rates under Proposition 103 is through the rate-setting process of the Department of Insurance, not through legislation. We urge you to vote NO on AB 2800.