Steve Poizner, California’s Insurance Commissioner, is seeking comments and reactions from the public regarding regulations related to the proposed Pay-as-you-drive (PAYD) auto insurance. Poizner’s office will be accepting public comments until five in the afternoon on July 9. The proposed insurance program is set to be implemented in fall.
The said insurance scheme involves insurers to calculate premium rates based on how much a driver takes his vehicle out on the road. Many groups have hailed the new initiative that aims to reduce the number of cars on the road and provide more accurate premium prices for consumers.
Commissioner Poizner pointed out that at present, insurance companies rely on consumers to report the distance they have driven. With the absence of a standard regulation, though, actual mileage may vary greatly. Companies also require motorists to re-estimate their mileage every three years but most drivers fail to respond to these requests and report previously recorded mileage. He also said that with the passage of the new proposal for more accurate recording and calculations, the pricing of insurance for individual clients could be much fairer and precise.
A previous proposal, Proposition 103, calls for three mandatory rating factors to be used by car insurance providers: the drivers’ record, annual mileage, and the number of years in driving experience.
Poizner’s proposal delves on the use of verified annual mileage instead of estimated miles for insurers to come up with accurate pricing. He further said that by relying on verified data, consumers could save more money on their premiums by driving less.
Environmentalist groups have praised the prepaid insurance scheme, saying that it can help in the fight to reduce the amount of CO2 in the atmosphere. The Environmental Defense Fund believes that if 30 percent of Californians adopt the PAYD program, the state can avoid an estimate 55 million tons of CO2 being release into the air between 2009 and 2020. The same proposal can help drivers in the state save some 5.5 billion gallons of gas as well as $40 billion worth of car-related expenses.
To help in the accurate recording of actual miles, Poizner recommends several methods:
- odometer readings done by the drivers themselves but verified by insurance companies
- readings done in smog check facilities
- odometer readings by auto repair shops
- the installation of a device to record mileage and compute premium prices.