The State of California is set to offer authorize insurance companies the chance to offer new “pay-as-you-drive” insurance policies. With this new system, drivers may soon be able to pay premiums based on the number of miles they drive.
State Insurance Commissioner Steve Poizner released a set of revised regulations allowing insurance companies to sell policies by the mile and drivers to buy insured “miles”. This would effectively let consumers save more money for driving less.
Poizner says that the regulations can expand insurance options for many motorists and allow a more liberated market to come up with incentives for driving less. He predicts that these new regulations will get cars off the road, resulting in cleaner air and fewer accidents.
The new rules would also cut down premium costs for drivers who reduce their driving time. Motorists can now link their premiums more closely to the actual number of miles they drive, says Poizner.
Drivers can purchase prepaid insurance coverage and a block of miles at a specific rate for a specific time frame. The consumer can then buy more miles if he or she runs out before the end of the policy period.
Insurance companies can monitor and accurately record the exact number of the driver’s miles through a variety of ways including odometer readings, smog-check stations, auto repair shops, or even an electronic transmitter which automatically reports mileage to insurers.
Environmentalists have hailed the recent developments as a step in the right direction towards cutting back greenhouse gases. The Environmental Defense Fund estimates that if some thirty percent of the California’s drivers would adopt the prepaid insurance policy, the state can steer clear of some 55 million tons of CO2 emissions between this year and 2020. The same period would also save Californians 5.5 billion gallons of gasoline and some $40 billion worth of car expenses.
Some auto insurance providers have also expressed interest in the new proposal. Sam Gorich, president of the Association of California Insurance Companies, says that they were intrigued by the option and felt that the introduction of a new program can give consumers more accurate and fairer rates.
The association is composed of Liberty Mutual, Geico, and the automobile clubs of Northern and Southern California.