Calif. Advances ‘Pay-As-You-Drive’ Legislation

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SACRAMENTO, CA — A California bill to allow pay-as-you-drive insurance plans using electronic monitoring devices moved a step closer to approval with passage by the Senate Appropriations Committee.

A.B. 2800 has strong interest from a number of insurers, while some consumer advocates are concerned about privacy issues and fear the information can be used to discriminate against drivers by ZIP code, which is not allowed in California. The bill previously cleared the full Assembly.

Companies including State Farm, the state’s largest automobile insurer, and Progressive, which is rolling out its pay-as-you-drive MyRate plan in a handful of states, have expressed interest in implementing PAYD policies in California (BestWire, Aug. 4, 2008).

Consumer and privacy-rights groups fear the potential tracking of data including mileage, speed, acceleration, location and time of day. The bill would allow discounts for drivers who participate in such programs, but makes no mention of discounts for other drivers who reduce their number of miles driven, a stated goal of the legislation, said Carmen Balber of Consumer Watchdog.

"Insurance companies fought mileage-based insurance rates for 18 years after the voters mandated them in Proposition 103. The industry didn’t change its mind overnight. Insurers back this plan because it will get their spyware into Californians’ cars, while doing nothing to make them more closely tie insurance rates to how far a motorist drives," Balber said in a statement.

Insurers have demonstrated that pay-as-you-drive plans are actuarially sound, said David Snyder, vice president and assistant general counsel for the American Insurance Association. While supportive of technological solutions, the effect on driving habits will be limited by the reach of the self-selecting pool of drivers who would participate in pay as you drive plans, he said.

"The major limitation has been the inability to measure mileage accurately for all drivers, not just the low-mileage drivers," Snyder said. "The only way to get where they want is by monitoring the mileage of all drivers."

Michael Replogle, transportation director for the Environmental Defense Fund, said privacy concerns are a "red herring." The popularity of electronic toll systems has shown that consumers are willing to have their data collected if they see a benefit, he said. "It’s little different than carrying a cell phone or a credit card or a toll transponder in your car," Replogle said.

Contact the author Sean P. Carr at: [email protected]

Consumer Watchdog
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