Consumers could use a friend on the Assembly Insurance Committee. I testified against two bills the committee passed this morning that will cause consumers to pay more for their auto insurance and violate voter-approved Proposition 103.
One of them (AB 2800 by Assemblyman Huffman) has the laudable goal of creating insurance incentives for people to drive less. But it would override voter-approved Proposition 103 to do it, let insurers charge two people who are exactly the same different rates, and ignores new regulations issued by the Department of Insurance that aim to do the same thing.
Prop 103 requires that the number of miles a person drives is the second-most important factor in setting insurance rates. The insurance industry fought this requirement for 18 years, but the new rules compel them to comply by this summer.
Even though no one has let those rules take effect yet, the industry claims they can’t set lower premiums for people who drive less because they can’t make sure drivers aren’t lying about how far they drive. In fact, the regulations are quite clear: insurance companies can require drivers to provide their current odometer readings to verify mileage.
What I think insurers really want is a system where only those drivers who agree to put an electronic tracking device in their cars will get the benefit of lower premiums for driving fewer miles. (Who wants to bet that they collect a whole bunch of other data too, like how fast you drive and whether you park near Jim’s Sports Bar three times a week?)
The bill’s unfair too. Here’s a scenario: Two people each drive 4,000 miles a year. One participates in his insurance company’s "green" plan that rewards low mileage. The other is insured by the same company, but doesn’t participate in the “green” plan. Maybe he never heard of it. If everything else about them is the same – including that low mileage – one of them will pay more just because he was never invited to join the “green” plan. It’s unfair to charge two people who are exactly the same different rates, and it’s also illegal under Proposition 103.
The bill violates Prop 103 in another way as well, by usurping the Insurance Commissioner’s power to set rates through a public hearing process. (Read our letter opposing the bill for a full explanation of how.) The bottom line: people should pay less for driving less, but not only if they agree to the insurance industry’s demands, and not at the cost of voter-approved consumer protections.
The second bad bill the committee let through this morning was AB 2956 by committee chairman Joe Coto. (He wasn’t even in the room to present the bill – wonder what that was about?) This is a reincarnation of a bill that has reared its head year after year in the legislature that would redefine the distinction between an insurance agent and an insurance broker.
Current law says that agents represent insurance companies and brokers can’t. This bill blurs those lines and would make it much easier for insurance agents to call themselves brokers and charge consumers an extra, unregulated, fee. Brokers are supposed to work for the consumer, and I don’t think it’s realistic to claim they can be paid by insurance companies and represent consumers too.
You can read our letter opposing this one, and laying out the history of the issue, here.
The insurance committee should be doing a little more than shaking the insurance industry’s hand as they raise prices and scuttle consumer protections.