Two auto insurance companies based in California have come up with the pay-as-you-drive insurance policies where the motorists who spend less time on road will be paying premiums that are significantly low when compared to the regular premiums. This offer will begin in the month of February. This new policy has been brought in as an incentive for drivers who don’t do a lot of driving. There are other companies which are also planning to follow the same.
The first to come up with this offer have been the State Farm Mutual as well as the Auto Club of Southern California. As per this plan customers are expected to produce the actual mileage that the vehicle has done before signing up for the program. Otherwise, they could transmit their mileage automatically in case there is a provision of the OnStar computer-communication system.
Consecutive reading would be recorded by the agent from State Farm or it could be done through third-party verification from the service records, California Smog Check data, Carfax, or through other sources.
Similar verification is done by the Auto Club and the motorists also have the chance to install the ‘automatic mileage data transmission’ device in their vehicles.
As per the new plan motorists who do around 2,000 miles or less per year will be able to save at least 45% on the insurance cost over a 6-month premium in comparison with the present rates that are calculated on the basis of the estimates given by the drivers themselves. The savings through the drop in premiums could amount to hundreds of dollars each year, stated State Farm.
When the mileage readings are more accurate, then it would translate into better savings as well as better risk underwriting, stated Bob Devereux. The logic is simple. Less driving means less exposure on the road and that directly translates to fewer accidents, hence the low premiums. “In the long run, if the price is matched with the risk involved, it is better for both the company as well as the client,” he stated.
The state’s second-largest auto insurance company, the Auto Club has estimated that the potential savings for the drivers would be anywhere between 1% to 10.5% and this would be directly dependent on how much the driver is on the road. Others who opt for the mileage verification program could end up saving at least $68 on each vehicle when compared to the others who keep the traditional insurance cover.
