California: Pay-As-You-Drive Insurance Option
02 Sep 2008
Californian Insurance Commissioner Steve Poizner wants to broaden the insurance options available by adding pay-as-you-drive to encourage people to drive less and help reduce greenhouse gases.
The proposal he describes as green auto insurance option paves the way for California drivers to obtain more environmentally friendly and more accurate insurance. "As a strong advocate of healthy market competition and a healthy environment, I am especially pleased to encourage this kind of innovation and additional options for consumers", he added.
Car insurance rates are currently based on estimated annual mileage. Poizner has proposed changes in the regulations permitting insurers to offer pay-as-you-drive coverage as an option. Additionally, the new conditions will also permit consumers to verify their mileage using odometer readings, car repair records or by using a special device.
For Poizner GPS is not appropriate for pay-as-you-drive insurance because of privacy and public policy reasons. These restrictions are expected to head off public criticism.
According to the California Department of Insurance, the Environmental Defense Fund estimates that if 30 percent of the state's drivers opt for the voluntary pay-as-you-drive coverage, the state could avoid 55 million tons of carbon dioxide between 2009 and 2020 - the equivalent of taking 10 million cars off the road. In addition, a reduction of 5.5 billion of gas and $40 billion dollars in car-related expenses is expected.
In July the Brookings Institution released a study saying if US drivers paid for accident insurance based on their mileage, driving would decline 8 percent nationwide, C02 emissions would drop 2 percent and oil consumption would fall by 4 percent. According to the study two-thirds of US households would pay less for car insurance and each household would save about $270 per car. Thirty-four states have a version of pay-as-you-drive insurance options available.
The California Air Resources Board supports Poizner's pay-as-you-drive proposal. Public comment is being taken on the regulations and after the process is complete, the new rules will take effect - probably no later than fall 2009, the department said.