Telematics programs, where auto insurance companies rely on in-car tracking devices to gather information about your driving habits and use that information to calculate premiums, hold promise but also dangers for consumers. Therefore, regulators need to implement safeguards and exercise adequate oversight to ensure that consumers aren’t exploited. A recent case aroused the ire of billionaire eccentric Elon Musk, whose behavior shows the necessity of consumer protection at the state level.

As a result of voter-approved Proposition 103, California has the strongest insurance consumer protections in the nation. It requires the prior approval of the Department of Insurance before insurers can implement property and casualty rates, authorizes a process for consumer participation in setting insurance rates, and requires that the main factors for setting auto insurance premiums are a driver’s safety record, their mileage, and their years of driving experience. While insurers are allowed to use real-time collection of mileage data in California, they have not been approved to collect the wider range of other data points that companies are collecting elsewhere. In other states, insurers also gather the time of day traveled, speed, hard braking, sharp turns, and driver location, among other data points. Under California’s consumer protection laws, companies can’t just choose to start collecting whatever data they want to monitor, and guardrails must be established through a rulemaking process.

Unconcerned with the consumer protection process, Tesla’s Elon Musk recently told investors “like we are pushing very hard for California to change the rules,” apparently so they can share whatever driver data they choose with their insurance company partners to set premiums and who knows what else. California Insurance Commissioner Ricardo Lara responded on Twitter, “Yesterday @elonmusk reportedly told investors he’s ‘pushing very hard’ to change the rules on telematics for California drivers. Push all you want, but we won’t bend on protecting consumer data, privacy, and fair rates. The Department of Insurance continues to uphold and implement the consumer protections set forth in voter-enacted Proposition 103 & since 2009 we have allowed vehicle data only to determine actual miles driven, and only in a way that protects the driver’s privacy.”

Musk’s response? He shot back, “You should be voted out of office.” He followed up with the claim “Your policies are directly responsible for the outrageously high insurance premiums paid by Californians.”

Famous/notorious for his Twitter fights and muscle-flexing crypto tweets, Musk seems keen on bullying his way into the insurance market with little regard for the rules or the facts. As for facts, while it’s true that insurance companies have a knack for overcharging customers throughout the country, California’s rules have protected Californians from the typically skyrocketing insurance rates around the nation. In 2019, Consumer Federation of America did an analysis and found that since 1989 — when California’s insurance consumer protection law known as Prop 103 took effect — the average expenditure on auto insurance premiums by Californians has increased by 12.5%, while the average increase across the country has been 61.1%, nearly five times that faced by California drivers. California drivers saved $154 billion in auto insurance premiums because of Proposition 103, and it also promoted competition in California’s auto insurance market, helping it become the second least concentrated auto insurance market in the nation. Californians have also gotten back far more in the form of pandemic refunds than residents of any other state. We have not analyzed how much Tesla and its insurance partners refunded while Americans were all stuck at home.

Tesla and its insurance company partners are selling auto insurance in California, Arizona, Illinois, Ohio, and Texas, where, last year Tesla launched its telematics program using real time driving behavior in Texas, using a “safety score” based on five metrics. As we have written about in detail, especially in our white paper Watch Where You’re Going:

What’s Needed to Make Auto Insurance Telematics Work for Consumers, there need to be rules of the road before consumers can feel confident that these telematics programs actually produce the savings and safety that are promised and are not just new ways for insurance companies to pick our pockets and sell our data.

But Musk sees a big business opportunity to rake in cash and doesn’t seem interested in waiting around for pesky consumer protection rules that might get in his way. And that’s why he is having this tantrum: California has rules to safeguard consumers and a process to make sure protections are in place before insurers start riding shotgun with us to evaluate our driving and selling our data. Since Musk is used to getting his way, he is lobbying regulators to get rid of these protections and allow Tesla to do whatever it wants. So when Commissioner Lara pushed back and said no, Musk responded with all the grace of a petulant tycoon.

But petulant tycoons, no matter what their wealth and influence, are not above the law. Commissioner Lara should hold firm and make sure that any telematics programs allowed in California do not exploit consumers, regardless of what Musk tweets.