Senate Insurance Committee Approves Bills to Invade Drivers’ Privacy, Raise Cost of Auto Insurance

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Committee Rejects Bill by Mercury Insurance to Block Refunds To Drivers Who Are Illegally Surcharged
Santa Monica, CA — The Senate Banking, Finance and Insurance Committee approved two bills yesterday that will allow insurance companies to spy on Californians’ driving habits, increase the cost of auto insurance and violate the voter-approved consumer protections of Proposition 103.
The committee passed AB 2800, a bill that would allow insurance companies to require drivers to install spyware devices in their cars with no limit on the information – including speed, acceleration, location, time of day and mileage – the companies could collect. Under the legislation, consumers who refuse to give up their privacy by allowing the hardware in their cars would pay higher rates. The legislation, authored by Assembly Member Jared Huffman of San Rafael, is backed by Environmental Defense Fund, which has aligned itself with the auto insurance industry, who claim the bill would encourage motorists to drive less by lowering insurance rates for lower mileage. However, AB 2800 would give discounts to drivers who agree to insurance companies’ mileage verification methods, not those with low mileage. The bill would allow insurance companies to overcharge motorists based on irrelevant criteria that Proposition 103 prohibits.
“Proposition 103 already requires insurers to charge people less if they drive less. Under new regulations that take effect next month after years of delays by the insurance industry, annual mileage will be much more important than zip code, as the voters dictated. AB 2800 just lets insurance companies get around these long-overdue changes by charging drivers more for refusing to let them spy in their cars,” said Carmen Balber, advocate with Consumer Watchdog. “The insurance industry is cloaking its anti-consumer actions under the guise of ‘environmental protection.’”
The cost of insurance would also go up under AB 2956 (Coto), approved by the committee as well. The bill would undermine a recent court ruling that protects customers from paying illegal broker fees to insurance agents. Current law is clear that only insurance brokers who are truly independent of insurance companies can charge broker fees, but AB 2956 would muddy the distinction between brokers and agents, who work for insurance companies not customers.  This will authorize “double-dipping” in which insurance customers will be forced to pay the same person both an agent commission and a broker fee, even when the person selling insurance is not a truly independent broker.
Illegal Amendments to Voter-Approved Proposition 103

Proposition 103 grants the power to set underwriting and other rating practices to the Insurance Commissioner, after an extensive and public review process. AB 2800 would usurp that power. The bill would also allow insurers to unfairly discriminate against drivers solely because they choose not to put a tracking device in their car or drive a car too old (pre-1996) to utilize the technology, which is also illegal under Prop 103. It is unconstitutional for the legislature to amend the voter approved initiative in such a manner, and bills similar to Huffman’s (and a Calderon bill also considered last night) have been voided by the courts in recent years in response to legal challenges brought by Consumer Watchdog and other citizen organizations.
AB 2800 faces immediate legal challenge if approved, and California taxpayers will pay the legal costs to defend legislation that will ultimately be rejected by the courts, said Consumer Watchdog.
“Food prices have soared, gas prices have doubled and the state budget is $15 billion in the red.  Californians can’t afford to fork over any more money to defend politicians’ illegal schemes to amend Proposition 103,” said Balber. “AB 2800 will cost Californians, delay the issue of mileage-based insurance rates for years, and inevitably be overturned in court.”

The committee did reject one bill that targeted consumer protections under Proposition 103. AB 1051, sponsored by Mercury Insurance, would have prevented courts from ordering refunds to customers when insurers impose illegal surcharges on policyholders or delay legally required rate reductions, another illegal amendment to Proposition 103. The bill was authored by Assemblyman Charles Calderon, from Whittier, who has also carried insurance industry legislation in the past that would harm his constituents.
Read Consumer Watchdog’s letters of opposition:
AB 2800
AB 2956
AB 1051
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Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

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