Last Holdout: Will California Finally Let Auto Insurers Employ Telematics? | Insurify

Telematics, the technology that monitors driving habits and reports the information to insurers, has almost become standard equipment across the country over the last 10 years.

But not in California.

The Golden State stands alone as the only state that prohibits insurers from using voluntary reporting of real-world driving behavior to help set auto insurance rates.

But as consumers battle rising costs, a major legislative fight is heating up in Sacramento. Assembly Bill 311, the Consumer Driving Data Protection Act, would overturn the telematics prohibition and change a nearly 40-year-old California law, signed before the word "telematics" was even coined.

The voice behind the bill

The bill's author, Democratic state Assembly Member Tina McKinnor, who has lost three friends in car crashes, believes real-time tracking will incentivize safer driving habits. The bill has already passed the State Assembly and recently earned unanimous support from the Senate Insurance Committee.

Following a July 9 amendment, the bill heads to the Senate Appropriations Committee for a key vote on Aug. 3.

If it passes, the bill could dramatically affect California's nation-leading 28 million licensed drivers. Californians would be able to sign up for telematics tracking if they so choose.

Supporters say telematics will quickly lower costs for safe drivers and curb distracted driving. Critics warn it would compromise privacy and weaken oversight.

Seeking solutions for rising rates

The average cost of full-coverage auto insurance in California has risen nearly 53% since January 2021, according to Insurify data. Insurers point to rising repair costs, inflation, and a spike in severe accidents.

California's 1988 Prop 103 requires insurers to set rates based on historical data, like DMV records, annual mileage, and years of driving experience. AB 311 would update this system by using a six-month review of a person's driving habits — including whether they swerve, stay in their lane, or run red lights.

Unlike most states, which regulate telematics primarily through insurance filings and general privacy rules, California's proposal spells out how insurers can use telematics, requires written consumer consent, and places explicit limits on the collection and use of driving data. The bill is unusual because it's intended to reconcile telematics with Proposition 103, which historically has limited how California auto insurers determine rates.

Nevertheless, supporters say telematics will immediately help safe drivers win lower rates. Groups like Streets Are for Everyone, which advocates for pedestrians and cyclists, have backed the bill.

McKinnor described the bill as a way to improve public safety, sharing her personal connection to the cause during hearings.

"I committed then to work with other families who have lost loved ones in vehicle accidents to make our streets and roadways safer," she said. "Telematics is a tool to do just that. It is time for California to join 49 other states and give drivers the option."

Is Maryland a cautionary tale?

Insurers typically promise discounts of "up to 40%" with telematics. But real-world results in other states are mixed.

A Maryland Insurance Administration investigation examined the results of telematics programs in its state and found that although enrollment grew by more than 45% from 2021 to 2023, financial benefits were uneven. Some drivers ended up paying more, particularly if the telematics revealed poor driving habits.

Among drivers who joined their insurer's telematics programs in Maryland:

31% saw rates fall.24% saw rates rise.45% saw rates remain flat.

Nearly a quarter of drivers who agreed to be tracked paid more for insurance, with premium increases ranging from 0.4% to 42.5%, according to a later Maryland workgroup report. Meanwhile, almost a third paid less, and neither report shows any drivers receiving discounts of 40% or more. The state also documented consumer complaints involving telematics-related premium increases as high as 42.5%.

'Black boxes' and oversight concerns

Strong opposition to AB 311 has fueled political conflict in California.

While most lawmakers support the bill, the California Department of Insurance opposes it. Opponents focus on three primary concerns:

The "black box" problem: Consumer Watchdog argues that insurers use secret algorithms to rate drivers. Josephine Figueroa, deputy insurance commissioner, warned that the bill "dilutes regulator oversight and allows insurance companies to shift core regulatory responsibilities to unregulated third-party telematics vendors."The AI loophole: Tech policy critics point to an "AI loophole." While AB 311's sponsors claim the bill bars artificial intelligence, the text still allows automated methods like "computational, statistical, actuarial, or algorithmic methodology" to assess driving data.Economic coercion: The Privacy Rights Clearinghouse warns that if insurers artificially inflate baseline rates for non-tracked policies, low-income drivers may be financially forced to surrender their data privacy to afford mandatory insurance.

What's next? The regulatory showdown

Because AB 311 changes key parts of Prop 103, it requires a two-thirds majority vote in both houses. Lawmakers must also prove the amendment protects drivers, which could be a challenging task given strong opposition from some consumer groups.

Bill sponsors have tried to make the deal more appealing to critics by adding privacy protections, such as requiring detailed location data to be deleted after six months.

As California nears the important Aug. 3 Appropriations hearing, the state faces a pivotal decision. If AB 311 passes, auto insurance in California could change permanently.

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