Pay-as-you-drive auto insurance rules ready
Automobile insurance companies in California could soon be offering pay-as-you-drive policies that base motorists' premiums on how many miles they drive.
State Insurance Commissioner Steve Poizner announced that new final regulations have been approved, allowing companies to begin selling the product, if they choose to do so.
"Pay as you drive is an innovative way to give California motorists financial rewards for driving less, leading to lower-cost auto insurance, less air pollution and a reduced dependence on foreign oil," Poizner said.
Current law says that premiums should be based partially on motorists' own estimates of how many miles they drive in a year. Insurance companies have complained that those estimates often are inaccurate, and that drivers actually travel more than they say they do.
The regulations allow insurers to offer discounts to drivers, who agree to have the number of miles they actually drive verified. Such verifications could include actually looking at odometers, reviewing maintenance or smog-check records on a vehicle or by installing some sort of electronic onboard monitoring and transmitting device.
The rules specifically prohibit the devices to be used to track a vehicle's location unless the car owner is participating in an existing program that already utilizes global-positioning satellite tracking, such as the General Motors OnStar service, Poizner said.
One intriguing feature of the new rules would allow insurers to sell prepaid policies that would provide coverage for a specific number of miles similar to prepaid cellphone services that provide a set number of minutes of talking.
Some industry groups welcome the new regulations. "This gives insurers and consumers an additional tool to help assure that premiums reflect the risk of having an accident," said Sam Sorich, president of the Assn. of California Insurance Cos.
-- Marc Lifsher
Marc Lifsher should have pointed out that per odometer mile auto insurance was pioneered in the 1980's by Patrick Butler, director of the Insurance Project of the National Organization for Women, who has published extensively on its application, as well as on the negative effect of traditional pricing on insurance markets in low-income zip codes. He drafted the Texas Per-Mile Choice Act (1901), and is currently a consultant to MileMeter, a Texas company that is the first auto insurer in the US to enable car owners to purchase miles of coverage at cents per-odometer mile rates. See more at www.centspermilenow.org and www.MileMeter.com
Posted by: Catherine Maynard | October 17, 2009 at 08:27 PM