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Tuesday, 17 June 2008 10:12

CA Watchdog Group Says Three Insurance Bills Will Raise Drivers' Rates, Put Spyware in Cars

Group says Bills Could Cost Taxpayers Millions For Legal Defense

Three 'anti-consumer' pieces of legislation that will raise auto insurance rates,
invade drivers' privacy and violate the voter-approved consumer protections
of Proposition 103 will be heard in the Senate Banking, Finance and
Insurance committee June 18.

"The insurance industry would pick drivers' pockets and peer into their
cars with three bills headed to the Senate Insurance committee this week,"
said Carmen Balber of Consumer Watchdog.


Assemblyman Jared Huffman's AB 2800 would allow insurance companies to

require drivers to install spyware in their cars that tracks speed,

acceleration, location, time of day, mileage and other data. Under the

legislation, consumers who refuse to give up their privacy would pay higher

rates. Sponsors say the bill would encourage motorists to drive less by

lowering insurance rates for lower mileage. However, AB 2800 would give

discounts to drivers who put black box technology in their cars, not those

with low mileage.

"Insurers want to know where we drive, when we drive and how long it

takes us to get there, but they shouldn't get to charge more to

Californians who won't accept their spying," said Balber. "Under new

regulations that take effect next month, Proposition 103 already requires

insurers to charge people less if they drive less. AB 2800 just lets

insurance companies charge drivers more for refusing to let them pry in

their cars."

AB 1051, by Assemblyman Charles Calderon, would lead to higher

insurance rates for drivers, homeowners and businesses by changing how the

Insurance Commissioner can review rates. The legislation would prevent

refunds to customers when insurers impose illegal surcharges on

policyholders or delay legally required rate reductions. The bill would

also apply the ratemaking standards used to deregulate workers'

compensation insurance to policies regulated by Proposition 103, a change

that means the Commissioner would be powerless to review rates for

reasonableness or fairness or establish standards prohibiting unfair


Assemblyman Joe Coto's AB 2956 would increase the cost of insurance by

undermining a recent court ruling that protects customers from paying

deceptive and 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 the

customers. This will authorize a "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

AB 2800 and AB 1051 would illegally amend Proposition 103, which can

only be amended by the Legislature to further its purposes.

Proposition 103 grants the power to set new rating factors to the

Insurance Commissioner, but AB 2800 would usurp that power for the

Legislature. The bill would also allow insurers to unfairly discriminate

against drivers solely because they choose not to put a tracking device in

their car, which is also illegal under Prop 103.

AB 1051 would eliminate the Insurance Commissioner's power under

Proposition 103 to order refunds when insurers are charging an excessive or

illegal rate. The bill would also limit Proposition 103's broad prohibition

on unfairly discriminatory rates for auto, homeowners and business

insurance to the narrow, insurer-defined terms that currently rule the

deregulated workers compensation market.

Both bills will face 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.

Insurers' Push for Changes Comes With Large Campaign Contributions

Assembly Members Coto and Calderon have taken substantial campaign

contributions from the insurance industry: $96,700 went to Coto and $55,681

to Calderon since 2007. Assemblyman Huffman has taken $5,675.

"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. "These bills may please insurance industry donors or deliver a

pyrrhic victory for the environment, but they will cost Californians and

inevitably be overturned in court."

AB 2800 and 2956 passed the Assembly last month. AB 1051 was "gut and

amended" in the Senate after it passed the Assembly last year; it must

return to the Assembly for approval.


Read Consumer Watchdog's letters of opposition:

AB 2800:

AB 1051:

AB 2956:

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