On Hold.

While public outcry and scientific studies indicate that cell phones are distracting drivers, insurers haven't changed their strategies to limit this risk factor when writing private-passenger auto policies.

The use of cellular phones is on the rise, and Americans are finding that talking on the phone while driving a car sometimes can be a lethal combination, This risk was underscored recently by an accident that captured the nation's attention and left a popular fashion model critically injured.

Traffic accidents caused by distracted drivers on cell phones have become so common that local and state governments have begun passing laws banning the use of handheld telephones while driving.

Insurers, however, are less concerned about cell phone usage in cars than they are with the costly claims resulting from accidents caused by distracted drivers. Cell phones are just part of the problem; motorists also divert their attention from the road to change radio stations and compact discs, use onboard navigational systems and electric razors, and operate wireless laptop computers while driving.

The National Association of Independent Insurers recommends that drivers pull off to the side of the road or use a hands-free system if they need to use the phone while in the car, said Dan Kummer, manager of personal auto lines with the NAII. "The main thing is, there is a higher probability of getting into an accident. Whether we can legislate this will be hard to do, but you can't legislate using a radio or CD player or talking to someone next to you, and they seem to be more of a factor than cell phones;' Kummer said.

The Ubiquitous Cell Phone

Cell phone ownership has exploded in the last 10 years to about 118 million subscribers in the United States, according to the Cellular Telecommunications and Internet Association. This means that most U.S. citizens have heard a cell phone ring and many have overheard loud phone conversations in public places. A survey of Americans by the Insurance Research Council also shows that an overwhelming 91% of U.S. households believe that using a cell phone while driving increases the likelihood of accidents.

Public cell phone use has even been tagged as a social issue, said attorney Chad Schultz, who wrote a sample cellular phone policy for the Society of Human Resource Management. "Everywhere you look, people have issues with cell phone use. Commuter trains want to have silent cars," Schultz said. "The reason it's important is, if you are taking these cases before a jury...you might be able to get a jury to react to it, because it's kind of a social issue today."

The general disdain for public cell phone use also is fanned by media coverage of accidents blamed on gabbing drivers. In April, supermodel Niki Taylor, whose face once appeared on six magazines in one month, suffered severe internal injuries in an auto accident allegedly caused when the driver of the car in which she was riding answered his cell phone. And 2-year-old Morgan Lee Pena was killed in 1999 in Bucks County, Pa., when a driver was distracted by a cell phone call and drove through a stop sign. The girl's parents subsequently created the Advocates for Cell Phone Safety and have appeared on TV shows, such as "The Winfrey Show" and "Good Morning, America" to advance their cause.

News reports often include statements from officials such as Rosalyn G. Miliman, deputy administrator at the National Highway Traffic Safety Administration, who labeled the issue of driver distraction as the most demanding highway-safety issue of the day. And in May, the organization's executive director, L. Robert Shelton, told Congress that while drivers always have had distractions, such as pushing buttons on a car radio, watching a child or eating, "our problem now is to understand a new set of distractions associated with an ever-growing array of new in-vehicle electronic devices referred to as telematics, rapidly being developed by the electronics and automobile industries."

Shelton was referring to the laundry list of high-tech items being socked into cars and demanded by the public, such as global positioning systems, CD players, televisions, night-vision technology and even note-taking systems.

Inconclusive Studies

Scientists also are chiming in on the issue. A recent Carnegie Mellon University study of the brain concluded that the very act of talking distracts the brain from the task of driving. A team led by the university's psychology professor, Marcel Just, conducted a study where subjects listened to sentences read to them while completing complex visual-processing task. They found that the amount of brain activity allocated to the task decreased 29% if participants were listening to a sentence.

"This has direct implications for cell phone use during driving, because it answers one of the classic questions about human thinking. "Just said. "We've demonstrated that the human brain has a limited ability to perform two cognitive tasks concurrently under demanding circumstances, such as simultaneously conversing and driving."

Many studies have been released on the effects of cell phone use while driving. They range from the American Automobile Association's conclusion that using a cell phone while driving was less distracting than changing a compact disc or selecting a radio station to the New England Journal of Medicine's report that the risk of getting into an accident while driving quadrupled if a cell phone was involved.

The federal government has been tracking driver-distraction data for several years. The National Highway Traffic Safety Administration reported in 1996 that driver distraction accounted for 20% to 30% of all crashes in the United States. Most recently, the government agency reported that fewer Americans than previously thought were using cell phones while driving.

The NHTSA reports that an estimated 500,000 people, or 3% of passenger-vehicle drivers, are talking on cell phones at any given time. In his testimony before a congressional committee this spring, Executive Director Shelton reported that several more studies on driver cell phone use are being conducted. One study will compare driver distraction when using handheld vs. hands-free cell phones. The results are due out this fall.

Despite the public outcry and scientific studies, many insurance companies still aren't asking private-passenger auto policyholders about their cell phone usage. State Farm, Allstate, Farmers, Progressive, Travelers and regional insurer Erie Insurance all said they didn't ask about cell phone use during the application process or when claims are filed.

Greg Ciezadlo, vice president of Farmers auto products, said the thirdlargest private-passenger auto writer doesn't ask because it's difficult to verify. "It was a little different 10 years ago when you had car phones; you could prove they were there. But trying to do something with it in underwriting or rating is very problematic," he said.

Ciezadlo explained that although he tends to end cell-phone calls quickly while driving, another person might log hundreds of hours a month talking on the phone in the car. "We're two very different risks. How do I separate those two different risks into buckets, and how do I verify that they belong there? It's the verification part that makes it difficult for pricing and underwriting," he said.

Insurers have brainstormed ideas about how to deal with increased cell phone usage by drivers. For example, one suggestion would be to add a $500 deductible to a claim if a cell phone was shown to be in use when an accident occurred. But this idea could be hard to enforce, Ciezadlo said, and it could be awkward for an insurer to impose the fine in the first place. "It's a bad situation' he said. "It's not customer friendly."

Ciezadlo sees insurers taking the role of the educator as opposed to the enforcer as they have done in the case of speed limits and seat belts. Farmers could model a program on its "You're Essential to Safety" program for teen drivers. In this program, new teen-age drivers and their parents visit a Farmers agent's office to view a video and complete a workbook on the basics of driving to obtain a discount on auto insurance rates. "Education--I think that's our role either through advertising or direct communications through our agents, which is our direct voice to our customers," Ciezadlo said.

On the commercial side, Travelers is tracking and monitoring cell phone use along with eight or nine other factors, such as aging baby boomers, use of sport-utility vehicles and how these may affect accident frequency. Erie Insurance is recommending that its commercial policyholders consider adopting guidelines for the use of cellular phones.

This precaution is also recommended by Schultz, who advises employers to issue a written policy about safe cell phone usage while conducting company business. This advice stems from the liability case involving an employee of Smith Barney who allegedly struck and killed a motorcyclist while making a cell phone call during off-business hours on his own phone. Plaintiffs attorneys were able to produce employees who testified that making cold calls during weekends was routine in their profession. The family of the victim agreed to a settlement of $500,000.

Schultz points out that although motorists can be distracted by many things, few can create liability issues for a driver's employer like cell phone use can. "They are always looking for ways to increase the number of participants in a lawsuit to get to the deep pockets of companies. I'm not saying that an employee changing a radio station is not an employer's problem, but talking on a cell phone and conducting company business may be an employer's problem. They must decide what their position is going to be and get information to people so they can avoid accidents and avoid liability if there is an accident," Schultz said.

Legislating Cell Phone Usage

In June, New York became the first state to make it illegal to talk on a handheld cell phone while driving. Twenty-six other states are considering similar measures. Published reports say the law came about because state polls said that 87% of New York residents supported the legislation, Gov. George Pataki backed it, and the bill's sponsor, Assemblyman Felix Ortiz, waged a five-year crusade for the bill after witnessing an accident caused by cell phone use.

New York's law, which goes into effect Nov. 1., fines first-time violators $100 and second-time violators $200. Anyone caught violating the law three or more times is fined $500 for each infraction. Although it's the first such state law in the United States, many other countries, such as Great Britain, Israel and Japan, already ban talking on cell phones while driving. Legislation to create a national ban on drivers using cell phones also was introduced in the House and Senate this year by Sen. John Corzine, D-N.J., and Rep. Gary Ackerman, D-N.Y. The bill calls for the secretary of transportation to withhold 5% of federal highway funds from any state that hasn't enacted or doesn't enforce a law that prohibits use of a mobile phone while driving. Currently, SB 927 has been referred to the Committee on Environment and Public Works.

Seven states passed legislation that deal with some area of cell phone use while driving. New Hampshire, Connecticut, Louisiana and Virginia passed laws to study the issue of driver distraction. In addition, New Jersey passed a law in July that requires accident-report forms to include questions about cell phone use during an accident.

The bans can be used to study accident trends, which can be useful to underwriters. "It will be very interesting in areas like California, where certain counties and cities banned cell phone use," said Farmers' Ciezadlo. "We can see if it had any impact on the numbers. We can do actuarial studies like that."

Multitasking Drive Time

The growing popularity of wireless and portable technology is likely to create more distractions for drivers in the next few years. Not only will people be able to make investments, view digital photos, play video games and surf the Internet on their cellular phones, but their cars will be loaded with James Bond-like gadgets for them to fiddle with while driving. For example, Cadillac's concept car, Imaj, will contain a night-vision system, obstacle-alert sensors and rear-vision cameras. Imaj also will contain three IBM Thinkpads that control e-mail, fax and cell phone use, along with DVD-viewing capabilities.

Insurers are keeping a watchful eye on these technology developments, because they may prove to be distractions for drivers. Dan Kummer, manager of personal auto lines for the National Association of Independent Insurers, said auto makers are loading cars with "amazing stuff," such as navigational systems and heads-up displays that flash the car's speed on the windshield. Global-positioning system technology makes these features possible. GPS is a satellite navigation system that was developed and maintained by the U.S. government to provide navigation capabilities for military ground, sea and air forces, according to the National Aeronautics and Space Administration. GPS uses a necklace of 24 satellites that revolve around Earth transmitting data.

"All of these things, I think, are more distracting than a cell phone, because we're all used to talking and driving, and now you have all of this new technology. And, quite frankly, after coming from the Intelligent Vehicle Safety Show, that's what I'm concerned with," Kummer said. "That's our big push these days. I was at the show to say all this stuff sounds great, but you have to do things to make them less confusing, so you're not pulling the driver's attention away at a critical time."

Auto makers are listening. Ford Motor Co. recently announced its Virtual Test Track Experiment, created to help the auto maker determine how to plan and design the high-tech gadgets that consumers want, but do it with safety in mind. Ford expects to collect data from the experiments to measure driver distraction. During the virtual ride, subjects wear a laser headset that tracks eye movement during a simulated drive, where they use a cell phone and change a radio station or CD while dealing with lane changes or the need to brake suddenly. Results are due early next year.

Most of this technology is possible through telematics--the use of global-positioning satellites to communicate location. Marketing consultants Frost & Sullivan report that the North American market for automotive telematics will total about $7 billion by 2007, compared with $380 million in 2000.

Telematics is currently being used in cars to improve driver safety and security. High-end auto makers like BMW and General Motors' Cadillac division are creating "smart" cars loaded with GPS systems that give voice-activated directions and sensors that automatically call for roadside assistance when air bags are deployed. For example, the GPS system OnStar can shut off a car's engine when the car is stolen. OnStar's system consists of a receiver and embedded cellular phone that is factory installed in the vehicle, which links it to a central station. Using GPS technology and wireless communication, drivers are able to contact advisers who can provide real-time roadside assistance.

Drivers now are able to manage their investments using OnStar's Virtual Advisor. In partnership with Fidelity Investments, OnStar is offering a subscription service that allows drivers to access real-time stock and mutual fund quotes, trade stock and mutual funds and transfer funds between a Fidelity account and bank account.

Telematics' future resembles the world of futuristic cartoon character George Jetson more than that of James Bond, as the technology will be used to link vehicles with homes and offices. Johnson Controls is marketing the Homelink Universal Transceiver, which allows a driver to remotely open his garage door and disengage home security systems before arrival, Tech analysts are predicting that cars will use GPS systems to keep track of car maintenance logs, so garages can diagnose a car's problem from miles away. They also see automobiles of the future being able to communicate voice-activated personal information--instant messages, calendars and e-mail--as well as driving information, such as location, restaurant choices and even personal music preferences.