Will Californians lie to save money?
Apparently.
New legislation takes aim at an honor system, of sorts, perhaps one of the
few remaining in which millions of dollars are at stake.
The
measure targets a process in which state law requires car insurance
premiums to be based partly on motorists’ estimates of how far they
will drive each year.
Honesty can hurt – financially.
"I
think it’s ingrained, given the structure of the current system, to
lie," said Michael Gunning of the Personal Insurance Federation of
California, whose members write about half the state’s auto insurance
policies.
Assemblyman Jared Huffman, D-San Rafael, proposed the
new measure, Assembly Bill 2800, to permit insurance companies to offer
discounts to drivers who volunteer to have mileage verified.
Huffman said it makes no sense to reward dishonesty or lowballing, while offering no incentive to drive less.
"Ask
yourself, what would most people do, given the opportunity to have a
lower insurance rate by estimating lower miles than they actually
drive?" Huffman said.
Sacramentans interviewed randomly Friday agreed.
"I think most people probably do skimp a little bit," said Derek Givens, 28.
"Hell, yeah, they do," said Jeremiah Collins, 25. "There’s no way they wouldn’t."
No
current statistics exist, but a state study of 1998 mileage estimates
found that 56 percent of motorists underestimated their travel – and
nearly half of those lowballers erred by more than 6,000 miles.
AB
2800’s voluntary program, though seemingly narrow in scope, teams
environmental groups with insurance companies as part of a much
broader, long-range strategy to cut miles driven and lower greenhouse
gas emissions, a key state goal.
Ultimately, passage of AB 2800
could set the stage for battles over whether the state should allow
insurers to require high-tech devices for tracking mileage and whether
to encourage pay-as-you-go policies that charge drivers for each mile
traveled.
Huffman said his bill does not address such issues and
that state Insurance Commissioner Steve Poizner has wide-ranging
latitude to represent consumer interests. But vehicles are pivotal in
the state’s fight against global warming, he said.
"We need to create incentives to drive less," Huffman said.
Californians
own 26 million cars and trucks driven more than 330 billion miles a
year, according to the state Air Resources Board.
"The threat
that California faces from climate change is real, and a big part of
that is transportation, which is something we all have control over in
our day-to-day lives," said Lauren Navarro of the Environmental Defense
Fund.
Opponents counter that the push for AB 2800 exaggerates
insurers’ woes and piggybacks onto environmental activism to achieve
corporate gain.
"I think there’s always sort of a credibility gap
between the industry’s claims and its actual performance," said Richard
Holober of the Consumer Federation of California.
California
regulations specifically ban insurers from requiring use of
technological devices to record mileage. But firms have the right to
require odometer readings when a policy is issued, and when it’s
renewed every six months or year, said Darrel Ng of the Department of
Insurance.
Gunning disagreed that the regulations give firms clear authority.
"In
fact, several times we asked for mileage verification tools, and the
(insurance department) refused because it would be too ‘burdensome’ on
the customer," Gunning’s group said in a letter supporting AB 2800.
Besides
confusion over legal limits, insurers say verification is not always
practical because many policies are sold online, not every firm has
ample staffing to handle a data crush, and stiff competition
discourages imposition of cumbersome policies that might upset
customers.
State Farm, AAA and Allstate insurance companies said they depend on policyholders, not odometers, when calculating mileage.
"We accept the customers’ estimate," said Cynthia Harris of AAA. "So the bottom line is the customer has the final say."
AB
2800 would allow insurance companies to propose methods of verification
for acceptance by Poizner, whose office has taken no position on the
legislation but is studying the issue separately.
Huffman’s bill awaits action in the Senate after passing the Assembly, 72-2. Gov. Arnold Schwarzenegger has taken no position.
Opponents
contend the legislation is a thinly veiled push toward allowing
insurance companies to require use of satellite technology – known as
GPS – that can track not only how far you drive, but where and how
aggressively.
"That’s a huge invasion of privacy," Holober said. "It’s nobody’s business."
"I
should not be required to give up my privacy in order to pay fair
insurance rates," added Carmen Balber of Consumer Watchdog, an industry
watchdog group.
Huffman called such claims a "phantom issue."
"The
notion that this will require installation of ‘spyware’ on your car is
nonsensical," he said, adding that AB 2800 proposes a voluntary program
in which the state, not insurers, would determine verification methods.
"If I thought that this bill was somehow anti-consumer, there’s no way I’d be carrying it," Huffman said.
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