News - Local News

POSTED: Sunday, Mar. 22, 2009

Auto insurer that wants to base fees on driving habits hits a wall with state privacy bill

Legislation aimed at protecting the privacy rights of car owners is drawing objections from auto manufacturers and Progressive Insurance, which hopes to introduce a program in Washington state that charges drivers based partly on how and when they drive.

The American Civil Liberties Union of Washington is pushing for the legislation, which would require automakers and other companies to inform car owners of the presence of devices that record information about their driving habits.

That includes event data recorders, or black boxes, installed on most newer cars, as well as electronic equipment such as GPS devices and OnStar, the wireless subscription service from General Motors.

In addition to requiring notification, a bill sponsored by state Sen. Claudia Kauffman, D-Kent, would clarify that vehicle owners are the owners of the data. With a few exceptions, a court order or the owner’s permission would be required in order for a third party to obtain it.

Carrie Tellefson, a lobbyist for Progressive Insurance, testified last week at a House Transportation Committee hearing that Substitute Senate Bill 5574 would prevent the insurance company from introducing its pioneering MyRate insurance program into Washington.

Progressive Insurance first tested the idea of usage-based insurance in 1999. The company introduced the current plan, called MyRate, in 2004 and now offers it in nine states, including Oregon.

Customers who agree to opt into the program plug a device into their car’s onboard diagnostic system, usually somewhere under the dashboard near the steering column. The device records information about how, when, and how much the car is driven, and wirelessly transmits the data back to Progressive’s servers.

Customers are either rewarded with a discount or penalized with a higher rate depending on the information collected.

The discount can be as much as 30 percent, and the surcharge up to 9 percent.

Customers can go online and look at personalized reports, and change their driving habits if they choose.

Progressive looks at fast acceleration and hard braking as one of the factors, but does not consider overall speed, said Richard Hutchinson, general manager of the MyRate program.

That’s partly because the company has decided not to use GPS to monitor its customers. Without that, the company may know, for example, that a car was driven at 55 mph on a particular day at a particular time, but it does not know whether it was on the freeway or in a school zone.

Other factors that Progressive considers include the time of day a car is driven, and how many miles it is driven. Midnight to 4 a.m. is considered high-risk. Medium-risk periods include weekdays from 4 to 6 a.m., rush hour – 6 to 9 a.m. and 3 to 6 p.m. – and 9 p.m. to midnight.

In states where Progressive offers the program, about 25 percent opt into it, Hutchinson said.

Other insurance companies are testing versions of usage-based or behavior-based insurance as well.

Jennifer Shaw, deputy director of the ACLU of Washington, doesn’t believe that the legislative proposal would stop Progressive’s plan. As long as customers understand what they’re agreeing to, the proposed legislation would not prevent them from participating in Progressive’s program, she told The News Tribune.

“People waive their privacy rights all the time,” Shaw said. “I think people should have the right to purchase (usage-based insurance) if that’s what they want to do.”

James Curry, a lobbyist for the American Insurance Association and General Motors, testified at the House Transportation Committee that his clients agree that electronic data belongs to vehicle owners, but they oppose the legislation in its current form.

Data should be available to third parties as part of the discovery process in litigation, and not require a court order, Curry said.

Ryan Spiller, a lobbyist for the Automobile Manufacturer’s Alliance, testified that federal regulations governing how car owners are notified about the presence of electronic equipment should be used in Washington.

“We can’t make manuals in cars different in every state,” Spiller said.

The lobbyists said they would meet with legislators to look for ways to modify the proposal.

This is the second year that the ACLU has backed legislation dealing with electronic data collected from cars. The definition of electronic data is purposely broad, Shaw said, to cover new technology as it arises.

“Who knows what’s the next thing in technology,” she said. “Maybe you could monitor the heart rate of drivers.”

Jason Hagey: 253-597-8542