BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | AB 2800| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) |Version: | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: AB 2800 Author: Huffman (D), et al Amended: 8/14/08 in Senate Vote: 27 SEN. BANKING, FINANCE, AND INS. COMMITTEE : 10-1, 6/18/08 AYES: Machado, Runner, Correa, Cox, Hollingsworth, Kehoe, Lowenthal, Margett, Scott, Wiggins NOES: Florez SENATE APPROPRIATIONS COMMITTEE : 14-0, 8/7/08 AYES: Torlakson, Cox, Aanestad, Ashburn, Cedillo, Corbett, Dutton, Florez, Kuehl, Oropeza, Ridley-Thomas, Runner, Wyland, Yee NO VOTE RECORDED: Simitian ASSEMBLY FLOOR : 72-2, 5/22/08 - See last page for vote SUBJECT : Automobile insurance: rates SOURCE : Author DIGEST : This bill allows insurers to apply a different rating factor for insurer-verified miles driven annually for purposes of automobile insurance rates. ANALYSIS : Existing Law CONTINUED AB 2800 Page 2 1.Provides that insurance rates for most property-casualty insurance, including auto insurance, are regulated by the Insurance Commissioner (Commissioner) on a prior approval basis. 2.Specifies that rates for private passenger automobile insurance shall be based on the insured's driving safety record, the number of miles the insured drives annually, the number of years of driving experience of the insured, and such other factors that the Commissioner by regulation adopts that have a substantial relationship to the risk of loss. 3.Establishes that the reduction of greenhouse gases is the policy of the State of California. This bill: 1.Finds and declares that reducing greenhouse gas emissions is the policy of the state, that vehicle mileage is a significant contributor to the greenhouse gas emissions produced, and that offering insurance on a verified mileage basis creates an incentive to drive less, assures more accurate insurance rates, and provides an incentive to reduce emissions. 2.Provides that, in determining the "number of miles driven annually" rating factor, insurers may apply different rating factors for insurer-verified annual mileage and applicant-estimated annual mileage. The insurer-verified annual mileage rating factor shall be a voluntary mileage-based insurance program. 3.Includes a declaration that the Legislature finds the bill to further the purposes of Proposition 103 (the 1988 initiative that established the regulatory structure that controls automobile insurance rates). Background Statutory law (Proposition 103 in 1988) requires that the insurance rates for private automobiles be based on the following for each individual motorist and vehicle: AB 2800 Page 3 1.Driving record. 2.Number of miles driven annually. 3.Number of years of driving experience. 4.Other factors that the Commissioner may adopt by regulation that have a substantial relationship to the risk of loss. Current insurance regulations base automobile insurance premiums for drivers on the projections of future mileage. These projections may prove to be accurate or inaccurate. Although insurance companies may require some supporting information, such as the customer's self report on the number of miles driven to work, insurers do not have a reliable means to verify the customer's mileage. Insurers may request, but not require, mileage verification through odometer readings based on recent vehicle service reports (e.g., oil change invoices) or mileage-tracking technology. FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local: No According to the Senate Appropriations Committee, the annual cost of this bill will be approximately $200,000 from the Insurance Fund for reviewing and approving new rates. SUPPORT : (Verified 8/15/08) Alliance of Automobile Manufacturers American Lung Association Association of California Insurance Companies California League for Environmental Enforcement Now California League of Conservation Voters California Secure Transportation Energy Partnership Environment California Environmental Defense Fund Ford Motor Company Green California National Parks Conservation Association Natural Resources Defense Council Personal Insurance Federation of California AB 2800 Page 4 Planning and Conservation League Santa Cruz County Regional Transportation Commission Sierra Club California The Greening Institute Toyota Motor Sales, U.S.A. Union of Concerned Scientists OPPOSITION : (Verified 8/15/08) Consumer Watchdog Consumer Action Consumer Federation of California Electronic Frontier Foundation ARGUMENTS IN SUPPORT : According to the author's office, this bill provides a financial incentive for California motorists to drive less, and for insurers to verify miles actually driven. By linking automobile insurance costs directly to each decision to drive the insured vehicle, the author's office believes drivers will make the decision to drive less, reduce greenhouse gas emissions, and be rewarded with lower auto insurance costs. The Natural Resources Defense Council supports this bill and states that it is consistent with the recommendations of the AB 32 Economic and Technology Advancement Advisory Committee report to the Air Resources board since it will help California to reach global warming emission reduction targets. The Environmental Defense Fund points out that 28 percent of California's greenhouse gas emissions come from passenger automobiles, and the great increase in annual vehicle miles driven between 1990 and 2006 in California (31 percent) requires this type of legislation. The Personal Insurance Federation of California, which supports the bill, states that the Department of Insurance's proposed "mileage verification regulations" do not allow insurers the adequate tools to achieve true miles. ARGUMENTS IN OPPOSITION : The Consumer Watchdog (formerly the Foundation for Taxpayer and Consumer Rights), which opposes this bill, states that while the bill has a laudable goal of attempting to create an incentive to drive AB 2800 Page 5 less, it will not serve that objective well because it improperly amends a voter approved initiative and will be rejected by the courts. Consumer Watchdog states that this bill purports to amend one of Proposition 103's mandatory rating factors by creating multiple mileage factors and to do this outside of the Commissioner's regulations on mileage verification, which are within the purview of the Commissioner. ASSEMBLY FLOOR : AYES: Adams, Aghazarian, Arambula, Beall, Benoit, Berg, Berryhill, Blakeslee, Brownley, Caballero, Charles Calderon, Carter, Cook, Coto, Davis, De La Torre, De Leon, DeSaulnier, DeVore, Duvall, Emmerson, Eng, Evans, Feuer, Fuentes, Fuller, Furutani, Gaines, Galgiani, Garcia, Garrick, Hancock, Hayashi, Hernandez, Horton, Houston, Huff, Huffman, Jones, Keene, Krekorian, La Malfa, Laird, Leno, Levine, Lieber, Lieu, Ma, Maze, Mullin, Nakanishi, Nava, Niello, Plescia, Portantino, Price, Sharon Runner, Ruskin, Salas, Saldana, Silva, Smyth, Solorio, Spitzer, Strickland, Swanson, Torrico, Tran, Villines, Walters, Wolk, Bass NOES: Anderson, Parra NO VOTE RECORDED: Dymally, Jeffries, Karnette, Mendoza, Nunez, Soto GFC:cm 8/25/08 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE SUPPORT/OPPOSITION: NONE RECEIVED **** END **** AB 2800 Page 6