Modernize the way we price auto insurance – telematics is a sensible approach

As Californians face down a pandemic and the accompanying economic uncertainty, we, as legislators, need to do even more to help make life easier for them. People are going through tough times and need as many breaks as we can conceive. 

As members of the California Legislative Technology and Innovation Caucus, we are constantly looking for ways to use innovation and technology to help realize our goal of improving the lives of everyone. One way to do that is to allow for the use of new technology to help Californians save more money on auto insurance. 

We are proud to be part of a state that has led the way in balancing innovation and consumer rights. Indeed, as the tech capital of the world, California innovation has helped our citizens save time and money by making transportation a little bit easier for commuters with ride sharing; helping them plan a vacation by way of home sharing; delivering food to their doorsteps; and ordering almost anything they may need online.   

The economic impact of the novel coronavirus has hit many families hard, and we need to use technology to help Californians save money wherever they can.

One technology exists today that can help Californians save money on auto insurance rates. That technology is telematics. Telematics is used to measure driving behaviors to determine how much a driver pays for auto insurance. In plain English, telematics uses an app or a device to measure speed, sharp turns, hard braking, distracted driving and other related driving habits.  Under the telematics approach, the safer drivers are likely to pay less – no matter their background. That is a sensible and fair approach.

Unfortunately, California is the only state that prohibits this kind of technology because of Proposition 103 that was written and passed in 1988. Prop. 103 was passed to protect consumers, lower costs and create a better insurance market – and it has been successful.  

But when the law was passed in 1988, the internet as we know it didn’t exist. Prop. 103 was passed in an age before cell phones, GPS Navigation and many other technological advancements.  Its interpretation doesn’t allow companies to rate customers on their driving behavior. Prop. 103 relies heavily on demographic factors, rather than basing your rate on how you drive. 

Rating on driving behaviors is not just fair, it can help make our roads safer.  Distracted driving is a growing problem. We should reward drivers for keeping their phones down when they drive.  Through technology, we can make our roads safer and help save lives.    

As with many technologies, we must take care to ensure consumer privacy is protected. Telematics-based insurance should be voluntary and an opt-in for drivers. By doing so, we can provide more choice for consumers in California while protecting their personal information.

We applaud the California Department of Insurance for moving in the right direction by initiating conversation on telematics with various stakeholders.  We encourage the continued discussion to ensure we balance consumer rights on these issues. Californians support innovation and, during this COVID crisis, we need to support them by giving them a break.