HOUSE BILL REPORT

E2SSB 5730

As Reported by House Committee On:

Business & Financial Services

Title: An act relating to usage-based automobile insurance.

Brief Description: Concerning usage-based automobile insurance.

Sponsors: Senate Committee on Financial Institutions, Housing & Insurance (originally sponsored by Senator Rockefeller).

Brief History:

Committee Activity:

Business & Financial Services: 3/15/11, 3/22/11, 2/16/12, 2/21/12 [DPA].

Majority Report: Do pass as amended. Signed by 8 members: Representatives Kirby, Chair; Kelley, Vice Chair; Blake, Hudgins, Hurst, Pedersen, Ryu and Stanford.

Minority Report: Do not pass. Signed by 5 members: Representatives Bailey, Ranking Minority Member; Buys, Assistant Ranking Minority Member; Condotta, Kretz and Rivers.

Staff: Jon Hedegard (786-7127).

Background:

Every person in this state who operates a motor vehicle must be insured under an insurance liability policy, a liability bond, a certificate of deposit, or be self-insured. There are minimum amounts of liability coverage required by the financial responsibility statutes.

The Insurance Commissioner (Commissioner) oversees the business of insurance in this state. This includes the regulation of insurance rates and policies. Automobile insurance rates and forms are filed with the Commissioner and must be approved by the Commissioner prior to use by an insurer. If the Commissioner determines that filed rates are not excessive, inadequate, or unfairly discriminatory, then the Commissioner must approve them.

Automobile rates may be adjusted for any factor that is not prohibited by law. Rates are often adjusted according to factors including the driver's age, sex, marital status, miles driven, claims history, geographical area, credit history, and the make, model, and year of a vehicle. The Insurance Code requires that certain safety features and anti-theft devices must receive due consideration in a rate filing by an insurer. A senior who takes a motor vehicle accident prevention course must receive a premium reduction in a rate filing by an insurer.

The Insurance Code has provisions exempting certain information, including information filed in support of rate filings from public inspection. Other provisions of the Insurance Code provide an exception to the exemption from public inspection for supporting information for automobile insurance rate filings. The supporting information is available for public inspection after a rate is approved and the filing becomes effective.

One area where the information does not become public is when an "insurance score" or "credit score" model is used. A model that utilizes credit history as a rating factor must be filed for approval of the Commissioner but, by law, is not subject to public disclosure. There are specific disclosure requirements for actions taken by an insurer based on credit history.

"Usage-based insurance" is not defined in the Insurance Code. The phrase is sometimes used to refer to a product where an insurer rates a policyholder based on how a vehicle was driven. This may include the amount of miles, location of the driving, time the miles are driven, speed, and other driving characteristics. Generally, some type of recorder is required to supply the insurer with the information used in rating. The insurer may apply penalties or rewards based on that information which can lead to a higher or lower rate.

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Summary of Amended Bill:

"Usage-based insurance" is defined as "private passenger automobile coverage that uses data from any recording device as defined in RCW 46.35.010, or a system, or business method that records and preserves data arising from the actual usage of a motor vehicle to determine rates or premiums."

Information regarding the usage-based component in a filing of usage-based insurance is confidential and must be withheld from public inspection.

Location data gathered in connection to usage-based insurance may not be collected without:

• written disclosure to the insured; and

• the insured's consent.

Individually identifiable usage information may only be used and/or retained for usage-based insurance:

• for purposes of determining premiums; or

• as specifically allowed.

Individually identifiable usage information may not be sold except with explicit permission of the owner of the information.

Amended Bill Compared to Engrossed Second Substitute Bill:

The limitations on the collection, use, retention, and sales of information related to usage-based insurance are added.

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Appropriation: None.

Fiscal Note: Available.

Effective Date of Amended Bill: The bill takes effect 90 days after adjournment of the session in which the bill is passed.

Staff Summary of Public Testimony:

(In support) A companion bill passed the committee. There were changes made in committee and on the floor. This is an opportunity to discuss those floor changes in the committee. There has been quite a bit of discussion around this bill. The changes made on the floor make the bill technologically neutral. It is supported by others in the insurance industry. The privacy language on the companion bill is not opposed. The bill is now technologically neutral and it is also neutral regarding insurers. This bill will help lead to a competitive market. This version of the bill will benefit the marketplace and the consumer. There will be innovation and competition in the market because of this bill.

(Opposed) None.

Persons Testifying: Representative Kirby; Carrie Tellefson, Progressive Insurance; Mel Sorensen, Property Casualty Insurance Association, Allstate Insurance, and Professional Insurance Agents Association; and Gary Strannigan, Safeco and Liberty Mutual.

Persons Signed In To Testify But Not Testifying: None.