Low mileage drivers to benefit from new policies


28A lot of motorists in California could end up paying a lot less for their insurance premiums every month, come February, which will see some new policies being witnessed. The biggest advantage lies with those policy holders who drive the least every year. This pay as your drive insurance policy is going to be offered by two major insurance companies in California, State Farm Mutual and Auto Club of Southern California. These insurance giants are offering a handsome reward for those customers who drive less, expecting that other drivers will follow in their footsteps.

As per the plan to be implemented by State Farm, customers are expected to provide their mileage or odometer reading at the time of signing for this new insurance policy. From then on the mileage readings could automatically be transferred through a computer system called OnStar which is installed in the GM vehicles. A State Farm agent would personally note all the subsequent readings. In case, this communication system is not installed in the vehicle of the policy holder, other third-party verification systems will be used for providing those records. These verification systems include California Smog Check or Carfax reports. There are other sources as well, that could provide the same information.

Auto Club is planning to use the same verification systems. It will also provide motorists the chance to install a data transmission device in their car for automatically transmitting mileage information from the vehicle. As per the estimations of State Farm, the ultra low mileage drivers, who are those drivers, who travel less than 2000 miles in their vehicle every year, would get a discount as high as 45% compared to the traditional insurance rates which are applicable currently. State Farm is also of the opinion that the premiums from this Drive Safe & Save, initiative could come down drastically. State Farm is the leading private car insurance seller in California and is planning to market this new policy aggressively. The company is hoping to get 25% of the current policy holders to sign up for this new policy.  The company is of the opinion that in the long run, both the company and the customer would benefit by matching insurance rates with the risk held. The insurance company currently has about 3.3.million policy holders.  The potential savings of drivers according to estimates from Auto Club are between 1 to 10.5%.  Less driving will therefore reduce accident risk and insurance cost too.