SENATE BILL REPORT

SB 5730

As Reported by Senate Committee On:

Financial Institutions, Housing & Insurance, February 16, 2011

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

Brief Description: Authorizing mileage-based automobile insurance.

Sponsors: Senator Rockefeller.

Brief History:

Committee Activity: Financial Institutions, Housing & Insurance: 2/15/11, 2/16/11 [DPS-WM, w/oRec].

Majority Report: That Substitute Senate Bill No. 5730 be substituted therefor, and the substitute bill do pass and be referred to Committee on Ways & Means.

Signed by Senators Hobbs, Chair; Prentice, Vice Chair; Benton, Ranking Minority Member; Haugen and Keiser.

Minority Report: That it be referred without recommendation.

Signed by Senators Fain and Litzow.

Staff: Edward Redmond (786-7471)

Background: The Insurance Commissioner (Commissioner) regulates insurance in Washington, including motor vehicle liability insurance. This oversight includes regulation of rates, forms, financial conditions, claims practices, and other issues related to the business of insurance.

All drivers of vehicles registered in Washington State must be insured under an insurance liability policy, a liability bond, a certificate of deposit, or be self-insured. In determining rates, motor vehicle insurance companies must give consideration to the impacts of safety and anti-theft devices. Insurance companies are required to file their rate plans with the Commissioner, and these rate plans must not be excessive, inadequate, or unfairly discriminatory.

Presently, no provisions exist in the motor vehicle liability code specifically addressing mileage based liability insurance products.

Summary of Bill (Recommended Substitute): The provisions regarding the filing of insurance rates open to public inspection are amended. Information associated with a filing for a usage or mileage-based insurance product that constitutes a trade secret is exempt from public inspection.

EFFECT OF CHANGES MADE BY FINANCIAL INSTITUTIONS, HOUSING & INSURANCE COMMITTEE (Recommended Substitute): Changes the title and limits the scope of the bill to provide an exemption from public inspection for certain usage or mileage-based insurance information.

Appropriation: None.

Fiscal Note: Available.

Committee/Commission/Task Force Created: No.

Effective Date: Ninety days after adjournment of session in which bill is passed.

Staff Summary of Public Testimony on Original Bill: PRO: This bill would invoke the power of the consumer in the marketplace by creating incentives for the person who is buying auto insurance to find the most cost efficient insurance possible. Mileage or usage based insurance offers the consumer a clear choice to drive within a set limit of miles in order to get a better rate. This type of insurance will save money, save gas, and will be better for the environment. Insurance based on miles driven will also improve public safety and will reduce congestion. The Commissioner supports the concept of mileage based insurance; there are some issues in the bill, however, that have not been fully worked out. The bill seems to create a mileage-based policy that is based on the number of miles instead of a time basis. Current policies based on a time duration provide notice to consumers as to how long the insurance coverage will last. A miles based policy may be challenging to predict when the policy will terminate. The discount provided should be based on actuarial findings that the lower mileage driven resulted in fewer claims or accidents. A demonstration project is already being done by King County; the project is funded by federal and state grants. The Commissioner would like to await the outcome of that project before or in lieu of commencing a separate state demonstration project.

CON: The bill speaks to a substantial discount to insurers in lieu of offering a mileage-based product. That is a very subjective term; there is concern how the Commissioner would regulate this and how it would apply to all insurers uniformly. The bill includes all vehicles including specialty vehicles, which probably is not the intent of the bill, but that would be the outcome based on the language in the bill. A number of insurance companies have already launched pilot programs and initiatives for pay as you drive and mileage based programs throughout the country. Nothing in Washington's statutes preclude these types of products from being introduced and available here. Many companies have developed proprietary products for mileage based programs. The bill, however does not offer any protection for such proprietary information. Driver privacy should be safeguarded; insurers should not be allowed to see where and when a person drives. People should not have to choose between their privacy and cost effective insurance.

OTHER: The bill is a good idea. Insurance companies have such products available in other states. It is currently not available in Washington because it would have to be filed with the Commissioner and be subject to public inspection including inspection from competitors. Insurance companies are not willing to bring the product to Washington without proper trade secret protection.

Persons Testifying: PRO: Senator Rockefeller, prime sponsor; Carrie Doluick, Transportation Choices Coalition; Drew Bouton, Office of the Insurance Commissioner.

CON: Jessica Harbin, Farmers Group Inc.; Mel Sorenson, Property Casualty Insurance Association of America, Allstate Insurance Company, American Family Insurance Company; Jean Leonard, Washington Insurers, State Farm Insurance Company; Shankar Narayan, ACLU.

OTHER: Carrie Tellefson, Progressive Insurance; Gary Strannigan, SAFECO, Liberty Mutual Insurance Group.