California’s Revised Pay-As-You-Drive (PAYD) Insurance Proposal Still Idling
The state of California recently revised a pay-as-you-drive plan to address some of the concerns voiced about an earlier version. With many states and several countries as examples, California proposed the adoption of a program that would require insurance companies to set their pricing based on the mileage traveled by consumers. The plan has certain advantages that would hopefully benefit the environment and focus the higher costs of insurance on the higher users, allowing for lower premiums for drivers with low mileage. State insurance experts estimate that this type of auto insurance would reduce miles driven by subscribers by about 10% and thereby reduce CO2 emissions by millions of tons. The state of California is hoping to mandate 100% adoption of PAYD insurance in 2010.
However, California consumer privacy groups such as the Electronic Frontier Foundation (EFF), although they support the theory behind the plan, are seriously concerned about the impact of the details of the plan on California drivers’ privacy. The idea of encouraging low mileage is a good one, and the plan to have people pay premiums proportionate to their miles-driven seems fair enough. But the way companies will access the mileage information could jeopardize driver location privacy and might accumulate a huge database of personal driving information that could be utilized for other insurance, as well as non-insurance, purposes.
One approach now used in PAYD programs to gather the mileage information is to have consumers provide self-reported odometer readings. Logically, insurance providers are concerned with the ease of insurance fraud connected with self-reporting, even though tampering with odometer readings is both a state and federal offense. So most insurance providers prefer the installation into the insured vehicle of a technological device, a so-called “black box,” that would report mileage back to the provider; unfortunately for the driver’s privacy, the device could also report location, seat-belt use, driving habits, speed, and a host of other personal driving information. Moreover, the insured would have no access to the information to determine reasons for rate increases, or any other changes.
EFF would prefer a plan based on odometer readings. But if devices must be used, privacy groups want to affirm that only mileage information is gathered, and that it is only used by the provider who gathers the information, and only for the purpose of assessing fees based on mileage driven. The plan just isn’t quite there yet.
To see a complete article on the California PAYD proposal:
http://arstechnica.com/tech-policy/news/2009/07/eff-to-ca-metered-auto-insurance-is-still-a-slippery-slope.ars
To read what the EFF had to say:
http://www.eff.org/files/payd-workshop-comments.pdf
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