California Pushes for Pay-As-You-Drive Car Policy


Insurance Commissioner, Steve Poizner, announced that they issued regulations allowing mileage verification for pay-as-you-drive (PAYD) car insurance policy or coverage, which is not yet available in a California market.

California Pushes for Pay-As-You-Drive Car PolicyIn PAYD, premiums will be determined on the number of miles or how far consumers drive. They have control to lower the cost of their car or vehicle insurance by driving less.

In amended regulations released recently by the Department of Insurance, it gives insurers an option to use either mileage-estimated or mileage-verified method in estimating rates for car insurance plans.

In mileage-estimated methods, figures for mileage will be determined through destinations the car will be driven, the number of days it will be used, and the record of miles driven for the last 12 months. An insurance provider may also require a consumer or applicant to provide them with their old policy, which has the record of distance driven by the vehicle.

An insurer may adapt the cost of auto insurance policy on the previous plan bought by the consumer.
On the other hand, odometer reading is used for mileage-verified methods. An odometer reading may be done by an agent of the company or provider. It can also be obtained from licensed smog check stations. The commission also allowed insurers to use technological devices that will collect mileage information from the car to be insured.

According to Poizner, using such a device is not a requirement for consumers. They may opt to decline.

He underscored that a technological device shall be used for collection of information to determine the vehicle’s insurance rate and not to be used for obtaining information of the car’s location.

Through the use of mileage-verified methods, policyholders may have reduced auto premiums because of accurate mileage information, Poizner added.

He said this method may encourage consumers to drive less and inspire insurers to fashion out an incentive car insurance policy, such as PAYD.

There are many groups in California who are supporting the PAYD policies. In order to lower the cost of car insurance, supporters of PAYD recommend the practice of walking or biking. They also encourage car pooling and use of public transportation.

The PAYD insurance policy is now available in the market in 16 states, except in California.

Poizner also said that availability of PAYD in the market may encourage a change of consumers’ driving lifestyle. Driving less can also help in saving gasoline. It can help lessen air pollution because there will be fewer automobiles on the streets and may lower car accident rates.