California Drivers Using Pay As You Go Insurance


Over the last two years, many drivers in Texas have benefited from low cost auto insurance by using an innovative pricing model dubbed as “pay-as-you-go”. Today, drivers in California will have the chance to try a similar model that would ultimately bring down their insurance premiums.

Auto Insurance Based On the Actual Mileage

If you have been driving for a long time, you know when buying insurance, your rate will be based on the estimated number of miles that you are going to drive each year.  For instance, the policy should have a list that says “under 12,000” or “12,000-24,000” miles, and so on. If you do not drive that much, you would normally choose “under 12,000” but in reality, you would only drive like “5,000” miles a year and still end up paying the same amount set for “12,000” miles.

In Texas, MileMeter introduced the nation’s first “pay-as-you-drive” auto insurance model where the drivers will only pay for the actual miles of using their vehicles. It was made available on the last quarter of 2008. However, this model did not receive a wide acceptance among insurance companies and many of them are still hesitant of using such model to their base clients. Fortunately, the Golden State of California is slowly adapting the said policy that allowed drivers to save money on their insurance premiums by reducing the number of usage each day.

Looking At the Benefits

One of the most prominent benefits that PAYD has to offer is not only on the savings a policyholder gets but to the environment and society as well.  Instead of driving, he could opt to use the public transportation, biking, car pools or even walking, which will greatly reduce the air pollution, car accidents and infrastructure stress on highways. If more and more people are getting used to this setup, the consumption of oil and gasoline will be reduced thereby lessening the dependency on oil imports from other countries.

A report from Brookings Institute revealed a substantial amount of savings if PAYD auto insurance is made available to all fifty states. For instance, they have calculated that about two-thirds of the American population will immediately realize the savings of about $270 per vehicle and the amount of losses of around $60 billion shall be spared because of auto related accidents.

The Changes in Time

If you are living outside Texas and California, the implementation of such insurance model will entirely depend on the consumers and voters themselves to pressure their government to implement similar policies. The biggest roadblocks are the current insurance regulations and the readiness of the insurance providers to offer PAYD to their customers.  In California, the insurance laws have been ratified last year, which allowed the insurance providers to offer this type of policy. As of today, there already few insurance providers who are signing up for the new program and few others who have shown interest to join.  An odometer reading or mileage assessment report is needed to quality for the policy. Another option is use a special device that will record the mileage usage that should bring in big savings in the end.