Pay-As-You-Drive car insurance in California unveiled

Commissioner Poizner of California’s Department of Insurance has proposed revised regulations that will give insurance companies the ability to offer consumers coverage plans that are paid for by the mile. Similar to individuals who purchase prepaid minutes for their cellular phones, the consumer will be able to pre-pay for a certain number of miles for a specified amount of time.

Under the revised regulations insurers will also be able to offer discounts for those that opt to purchase a mileage verification policy. This allows Californians to pay for miles that are actually driven instead of an estimated number which is currently one of the major factors which determine rates.

There are several methods that can be used to verify mileage including odometer readings by an insurer’s agent or broker, automobile repair centers, smog check stations, self-reporting by the insured. There is also a device which can be placed in the customer’s vehicle to monitor miles driven; however, regulations prohibit insurers from using these devices to obtain the location of a driver.

The proposal has been developed with benefits in mind for motorists, the state and the environment. This type of California car insurance coverage will provide the incentive of premium discounts for not operating over a predetermined amount of miles, which will encourage residents to drive less. This will cause less congestion on roadways, lower gasoline consumption and reduce pollution.

It is estimated by the Environmental Defense Fund that if 30% of drivers purchase a pay-as-you-drive policy, it can eliminate 55 million tons of CO2 emissions through the year 2020. This could equate to having 10 million cars off the streets and save 5.5 billion gallons of gasoline.

Although there are many benefits, it may not be right for everyone. Those who have a long commute to work or live in rural areas may end up paying more compared to the conventional policies currently being offered. The “pay-as-you-drive” policy will be more beneficial to those able to keep commute at a minimum in order to reduce insurance premiums.

See press release here.

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