Association of California Insurance Companies Statement on the Proposed Amendments to Section 2632.13 of Subchapter 4.5, Title 10, of the California Code of Regulations File No. RH0542805 August 26, 2009
___________________________________________________________________________ The Association of California Insurance Companies (ACIC) is an affiliate of the Property Casualty Insurers Association of America (PCI) and represents more than 300 property/casualty insurance companies doing business in California. ACIC member companies write 40.5% of the property/casualty insurance in California, including 50.8% of personal auto insurance. ACIC believes that, in several instances, the proposed amendments to Section 2632.13 would create restrictions that would make it difficult for an insurer to provide its customers with fair automobile insurance rates. The Department of Insurance has mandated that when an insurer develops its automobile insurance rates, the insurer must give an importance to driving record that outweighs the importance given to any other factor. In order to be fair to all drivers, driving records, including records of accidents where a driver was principally at-fault, must be as complete as possible. The proposed amendments go in the wrong direction. Several provisions in the amendments unreasonably restrict an insurer’s ability to consider at-fault accidents. Those restrictions would allow drivers who are principally at-fault for accidents to get a price break they do not deserve. Good drivers, who are not at-fault in accidents, would be forced to subsidize the price breaks by paying more than they should for insurance coverage. Those provisions in the proposed amendments should be rejected. Section 2632.13 (b) – Accidents in the proceeding three years ACIC agrees with the proposed amendments’ intent to establish criteria for deciding whether a driver may be charged with a principally at-fault accident for the purpose of determining eligibility for the Good Driver Discount policy and determining a driving safety record. However, the amendments’ imposition of a three-year time frame on both the Good Driver Discount determination and the driving safety record determination is not required by statute and is inconsistent with the mandate that the insured’s driving safety record must be the most important determinant of automobile insurance rates and premiums.
Association of California Insurance Companies, 1415 L Street, Suite 670, Sacramento, CA 95814 – (916) 449-1370 or Fax (916)-449-1378
Insurance Code §1861.025 (b) limits the determination of eligibility for the Good Driver Discount to accidents occurring during the preceding three years. Insurance Code §1861.02 imposes no time limit on driving safety record. The proposed amendment to Section 2632.13 (b) is inconsistent with this statutory framework. The three-year time limit in Section 2632.13 (b) is properly applied to Good Driver Discount eligibility but the three-year limit should not be applied to consideration of principally at-fault accidents for determining an insured’s driving safety record. Insurance Code §1861.02 (a)’s mandate that driving safety record must be the most important determinant of rates is not restricted by any time frame. Because driving safety record is the major determinant of rates, accidents which occurred more than three years ago that can be shown to be credible indicators of loss must be considered. The proposed amendment to Section 2632.13(b) would prohibit an insurer from considering a driver to be principally at-fault for an accident that occurred more than three years ago. This prohibition is inconsistent with the principle that insurance rates must reflect the risk of loss. If an insurer is able to provide actuarial justification for considering accidents that occurred more than three years ago, the insurer must be given the opportunity to charge for the risk indicated by those accidents so that the insurer’s rates are fair. The proposed amendment’s three-year restriction would hurt good drivers. All insurers provide Good Driver Discount policies based on three years of driving experience. Some insurers provide an additional discount to those good drivers who were not principally at-fault for accidents beyond the three-year period. The strict three-year restriction in the proposed amendment would bar this reward to especially good drivers. There is no justification for this prohibition. The proposed three-year limit in the amendment to Section 2632.13(b) is properly applied to the eligibility for the Good Driver Discount, but the amendment should not be applied to an insured’s driving safety record. Section 2632.13 (b) (l) – Threshold for property damage The proposed amendments would increase the threshold for considering property-damageonly accidents from $750 to $1,000. This increase is not warranted. The regulatory threshold was changed from $500 to $750 when the Legislature amended Vehicle Code §1600 to increase the threshold for reporting accidents to the DMV from $500 to $750. The threshold in Vehicle Code §1600 remains at $750. The Department of Insurance should maintain consistency with the Vehicle Code. The proposed increase to $1,000 would bar consideration of some accidents that may be indicators of risk of future loss. This restriction is inconsistent with the public policy that driving 2
safety record must be the most important determinant of automobile insurance rates. If an insurer is able to present actuarial justification that accidents with property damage of less than $1,000 are credible indicators of the risk of future loss, the insurer should be allowed that opportunity so that its rates fairly match premiums with risk. Section 2632,13 (b) (l) and (2) – Bodily injury Vehicle Code §1600 sets no threshold for the requirement to report an accident that results in bodily injury. The Department of Insurance should follow the Legislature’s guidance and not impose a $1,000 threshold on principally at-fault accidents. This is good public policy. Insurance Code §1861.025 (b)(3) sets no minimum on considering accidents involving bodily injury for the purpose of the Good Driver Discount eligibility. It makes good sense that a driver who is the principal cause of an accident that results in a bodily injury does not deserve the Good Driver Discount. And it makes sense and is good public policy that a driver who was principally at-fault in an accident that resulted in any bodily injury should have that accident considered as part of his or her driving safety record when his or her automobile insurance premiums are developed. Proposed Section 2632.13(b)(2) would impose a $1,000 bodily injury threshold on a subsequent insurer but not on the insurer that was the insurer at the time of the accident. This would create an illogical situation. A driver who was insured by Insurance Company A at the time of an accident for which the insured was principally at-fault and which resulted in bodily injury damage of $500 would be ineligible for the statutory Good Driver Discount with Insurance Company A. However, under the proposed Section 2632.13(b)(2), the driver would be eligible for the same statutory Good Driver Discount if the driver moves to Insurance Company B. This manipulation of the Good Driver Discount should not be encouraged by regulations. The $1,000 bodily injury threshold should be deleted from proposed Section 2632.13(b)(2). Proposed Section 2632.13 (b)(l) refers to “reasonable evidence of bodily injury.” Proposed Section 2632.13 (b) (2) describes “reasonable evidence.” The $1,000 threshold should be deleted from the description and the description should be revised to read as follows: (2) Reasonable evidence of bodily injury includes, but is not limited to, medical records, statements by the insured, evidence presented by bodily injury claimants and information provided by an insurance-support organization as defined in Insurance Code §791.02 (l). Section 2632.13(c) – Accidents where a driver is not to be considered principally at-fault The current regulation that lists accidents where a driver may not be considered to be principally at-fault was adopted before the latest amendments to regulatory Section 2632.8 which significantly heightened the weight that is assigned to driving safety record. Because of the increased importance of driving safety record, the assumptions about excluding accidents from principally at-fault determinations need to be re-examined. 3
Section 2632.13 (c)(l) – Rear-end accident In some rear-end collisions, the driver of the struck vehicle may be at fault. The blanket prohibition in this section should be deleted and an insurer should be allowed to investigate a rear-end collision to make a principally-at fault determination. Section 2632.13(c)(2) – Moving Traffic Violation A driver should be exonerated only if the other driver involved in the accident was convicted of a moving traffic violation that is a one point violation. Otherwise, a driver causing an accident could escape accountability even where the violation of which the other driver was convicted had no role in causing the accident (for example, failure to buckle a seatbelt). Moreover, the simple fact that a driver is cited does not necessarily mean that driver caused the accident. Oddly, sometimes a DUI driver is not at fault for the accident. This section should be deleted and an insurer should be allowed to investigate fault even when one driver is convicted and the other driver is not convicted. Section 2632.13 (c)(3) – Hit and run accident The exclusion of damage resulting from the action of a hit and run driver relies on the vague standard of reporting the incident within a “reasonable time after the accident.” This standard makes it difficult for an insurer to know for sure whether it may investigate the incident for a determination of fault. It is reasonable that a person will report hit and run damage to legal authorities within 30 days. The phrase “within 30 days after the accident” should be substituted for the current “reasonable time” provision. Section 2632.13 (c)(4) – Contact with animals The absolute conclusion that a driver who was involved in an accident resulting from contact with an animal can never be principally at-fault is not correct. It is reasonable to conceive of contact with an animal that was caused by reckless driving, speeding, illegal lane changes or illegal cell phone use. An insurer should be allowed to investigate accidents that result from contact with animals. Section 2632.13 (c)(6) – Avoiding an accident The current exclusion of solo accidents involving a “hazardous condition” provides some objective test for limiting the exclusion. The proposed amendment would allow a driver who was involved in a solo vehicle accident to escape a determination of fault by contending that he or she was engaged in an avoidance maneuver, when in fact the driver fell asleep at the wheel. The solo vehicle exclusion from principally at-fault determinations must be narrow to achieve fairness in developing insurance rates. The proposed amendment to Section 2632.13 (c)(6) should not be adopted. Section 2632.13 (e)(4) – Confirmation in writing The driver confirmation proposed in this new section is appropriate, however the requirement that the confirmation be “in writing” is too limiting. A confirmation by a driver that he or she was principally at-fault, made orally, either in person to an insurer representative or over the 4
telephone to an insurer representative, is sufficient as long as the confirmation is documented in the insurer’s file. The “in writing” requirement should be deleted from Section 2632.13 (e)(4). Similarly, the “in writing” requirement should be deleted from the confirmation provision in Section 2632.13(f). Section 2632.13 (f)(2) – Failure to provide information within 20 days of receipt According to the proposed amendment to this section, an insurer’s determination of principally at-fault in cases where the driver refuses to provide information is triggered “20 days of the receipt of an insurer’s written request.” This is an unclear standard. An insurer may not know when a person actually receives a request for information. In order to provide insureds, insurers and the Department of Insurance with a clear standard for when an insurer may consider a driver who fails to provide information to have been principally at-fault, the time frame for the refusal should be set at “within 30 days of the date the insurer sent a request for the information.” This approach should also be taken to the “20 days of receipt” provision in Section 2632.13 (h). Section 2632.13 (f)(2) – Bodily injury The proposed last sentence to this section should not be adopted. A Motor Vehicle Record (MVR) maintained by the DMV is a reliable source of information. An MVR that indicates that an accident involved bodily injury or death is a proper basis for counting the accident as one involving bodily injury or death. The sole basis prohibition in the proposed last sentence in Section 2632.13 (f)(2) would also apply to a “C.L.U.E. report.” It should be noted that a C.L.U.E. report is a loss history report that is provided by one insurance-support organization, but loss history reports also are provided by other insurancesupport organizations. The regulations should not single out one type of loss history report. In any event, there is no reason or necessity to prohibit a bodily injury or death included in a loss history report provided by an insurance-support organization from serving as the sole basis for concluding that an accident involved a bodily injury or death. An insurance-support organization’s loss history reports are subject to the Insurance Information and Privacy Protection Act (Insurance Code §791 et seq.) which specifically gives consumers the right to review and correct information in those reports (§791.09). This assures the accuracy of the reports. Insurers recognize that insurance applicants must be allowed to provide information contrary to a loss-history report, but certainly such reports can serve as basic data on which to base insurance decisions on individuals. Moreover, insurers should be able to rely on loss history reports because such reports promote uniformity and consistency in the insurance marketplace and enable that marketplace to 5
operate efficiently for millions of insurance consumers. Without loss history reports, the systemic efficiency that is achievable only through such consolidation of effort would be lost. The cost of providing insurance would have to be absorbed by individual consumers whose insurance applications would have to be individually investigated by prospective insurers. The cost to insurers of disallowing reliance on loss-history reports would be exorbitant. The result would harm competition because consumers would find that shopping for insurance and/or changing their insurer would be far more difficult. As proposed, this amendment is counterproductive from a public policy perspective because it would undermine the benefit to insurers and consumers alike of the large-scale information sharing that is made possible through loss history reports. Section 2631.13(h) – Contrary information Proposed amendments to Section 2632.13 (h) would reward a driver who fails to respond to the insurer’s request for confirmation of contrary accident information that the insurer discovers. The driver’s refusal to respond to the insurer’s request would force the insurer to undertake an often lengthy and costly investigation. ACIC believes that a better approach is to create consequences for the drivers who fail to cooperate in reasonable verification efforts. We recommend the following modification to proposed amendatory language in Section 2632.13 (h) If the driver does not confirm the accuracy of the contrary information in writing, the insurer may use the contrary information as follows: (1) If the insurer that provided coverage at the time of the accident determined the driver to be principally at fault for the accident in accordance with the Section, the insurer may consider the driver to be principally at fault; or (2) If the driver did not have insurance that provided coverage for an accident if no other insurer of any person involved in the accident made a determination that any other driver was at least 51% of the proximate cause of the accident, the insurer may consider a driver to be principally at-fault if the insurer has sufficient information to make that determination. For the purposes of this subsection, an accident reported solely on an MVF shall not be considered “sufficient information.” Section 2632.13(j) – Eligibility for Good Driver Discount ACIC believes a new subsection (4) should be added to Section 2632.13 (j). The new subsection should read: (4) A driver who fails or refuses to provide information as described in Section 2632.13(f) is not eligible for a Good Driver Discount. This subsection is needed to prevent a potential abuse. Under Section 2632.13(f)(2), if an uninsured driver who was principally at-fault in an accident involving bodily injury fails to 6
provide an insurer with requested information, the insurer may consider the driver to be principally at-fault. However, because of the restriction on the use of MVRs and loss history reports in the section, the insurer may not be able to count the accident as one involving bodily injury. Thus, the driver could qualify for the Good Driver Discount even though he or she does not deserve it. This result is inconsistent with Insurance Code §1861.025(f)(3) which provides that a driver who was principally at-fault in an accident involving bodily injury or death is not eligible for a Good Driver Discount policy.
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