BILL ANALYSIS                                                                                                                                                                                                    



                                                                       



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                                 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

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           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:








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          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







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          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  







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          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










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