Auto insurance by the mile coming closer in California
SACRAMENTO
June 26, 2009 9:50am
• State would be first in the nation
• ‘We may see fewer cars on the road’
• ‘We may see fewer cars on the road’
California drivers may soon be able to pay insurance premiums based on the number of miles they drive, potentially saving money for those who drive less.
Department of Insurance Commissioner Steve Poizner on Friday revealed revised regulations that will allow companies to sell automobile insurance by the mile, letting consumers pay only for the miles they drive.
"These regulations expand insurance options for consumers, allowing a freer market to create incentives for driving less," says Mr. Poizner. "By empowering consumers to take charge of their insurance bill, we may see fewer cars on the road; which means cleaner air, safer streets and lower premiums."
Insurance companies can continue to offer traditional coverage based on estimated mileage. However, now they can also offer a verified mileage program instead of or in addition to a traditional estimated mileage program.
Pay-as-you-drive insurance is a way for motorists more accurately to pay for the coverage they need, by linking their premium more closely to the number of miles they actually drive, says Mr. Poizner.
Under the prepaid, or "price per mile" option, consumers would have a new option to purchase a block of miles at a specified price for a set time period. If a consumer runs out of miles before the end of the policy period the consumer can purchase more miles, Mr. Poizner says.
The revised regulations also allow insurers to offer discounts to drivers who opt to purchase a mileage verification policy.
If a driver elects to purchase a pay-as-you-drive policy, the insurer would verify the driver's miles through a variety of methods, including odometer readings taken by the insurer or its agents or vendors, auto repair dealers, smog check stations, self-reporting by the policyholder or a technological device placed in the consumer's vehicle, the insurance commission says.
The amended regulations explicitly prohibit insurers from gathering location data from consumers through the “technological device” which would track mileage.
“It is vital that the privacy of drivers remains intact. In these amended regulations, I have expressly prohibited insurance companies from using GPS devices to obtain location data from consumers," says Mr. Poizner.
Pay-as-you-drive coverage has been touted by environmental groups as a way to help the environment, he says. Last August, the Environmental Defense Fund estimated that if 30 percent of Californians participated in the coverage, California could avoid 55 million tons of CO2 emissions between 2009 and 2020, save 5.5 billion gallons of gasoline and save Californians $40 billion dollars in car-related expenses, Mr. Poizner says.
Additionally, the California Air Resources Board has recommended the adoption of pay-as-you-drive as one of the means to meet future climate change gas reduction targets, he says.
California law has procedures in place to allow for public involvement in adopting new regulations, including public comment on the revised regulation. After these procedures are completed, the regulations will take effect as soon as possible. Insurers will then be able to apply to offer pay-as-you-drive insurance in California. The regulations are anticipated to take effect in fall 2009.
Copyright Central Valley Business Times © 2009
Central Valley Business Times is an online unit of BizGnus, Inc.
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