The Maryland Insurance Administration has issued a draft bulletin outlining notification requirements for automobile insurance premium increases tied to telematics programs.
The proposal, which mandates detailed disclosures about factors affecting premium changes, has drawn responses from key industry players, including State Farm Mutual Automobile Insurance Co. and several trade associations, according to a report from AM Best.
The proposed rules would require insurers to identify each driving behavior measured through telematics programs that contributes to a premium increase.
Insurers would not need to specify the proportional contribution of each factor but must provide this data if requested by the insurance commissioner. Notices must be delivered at least 45 days before the increase takes effect and avoid vague language such as “may have included” or “increased due to some or all of the following.”
If applicable, the notices must also state when premium changes result from insufficient driving data or policyholders opting out of telematics programs. Insurers are expected to adjust notice-generation processes to comply with the new requirements.
During the comment period, the American Property Casualty Insurance Association (APCIA) criticized the proposal as a significant shift from current industry practices. APCIA argued that the rules would duplicate existing disclosures provided when policyholders enroll in telematics programs.
According to Nancy J. Egan, APCIA’s vice president of state government relations for the mid-Atlantic, some insurers estimate the proposal could increase the number of premium-increase notices by 33%. The same percentage rise in premium-protest investigations by the insurance department is also expected.
“Additionally, the requirement that the insurer must be 'able to provide all relevant data about the insured that was measured through the telematics program' could threaten the viability of many companies' telematics programs and the discounts they offer to consumers,” Egan said in an emailed statement to AM Best.
“APCIA has asked for clarification regarding how much specificity needs to be disclosed as the formulas and weighting used in pricing are closely guarded trade secrets for both the companies,” added Egan.
State Farm has requested nine months to implement changes and sought clarification on data retention and disclosure requirements during premium protests.
The National Association of Mutual Insurance Companies (NAMIC) echoed these concerns, advocating that notices include only factors directly linked to premium increases. NAMIC also proposed limiting data retention to one year or the policy term.
Telematics-based pricing, which assesses actual driving behavior rather than proxy data, is an evolving aspect of the U.S. auto insurance industry, said Casey Kempton of Nationwide. In 2023, Maryland’s largest private passenger auto insurers by market share included Berkshire Hathaway (22.71%), State Farm (18.39%), and Allstate (12.41%), AM Best reported.
How do you see these proposed changes impacting drivers and insurers? Share your thoughts in the comments.
