New types of coverage policies are being offered by insurance giants in California, State Farm Mutual and Automobile Club of Southern California. These policies would be rewarding those drivers who drive less by offering lower monthly insurance premiums. Pay as you drive schemes will be put in place by both the insurance companies. This new scheme will allow consumers the flexibility to choose their premiums based on the total miles they drive.
This scheme could be the starting of similar policy changes from many other companies that will offer incentives to policy holders to drive less. It augurs well for a region of the country, which is known for its traffic, congested freeways and pollution. This will also help convince the motorists and other policy holders to avoid taking free trips in their cars, thus meeting with clean air standards and mandates set for avoiding global warming.
This policy change has been encouraged largely by research which has shown that the pay as you drive plan will reduce the number of accidents in the area and also reduce the number of working days missed by employees due to asthma. Also, the research has shown that these policies will successfully help consumers in the area save more on their insurance premiums.
According to the plan by State Farm, policy holders will provide the odometer readings at the time of signup. Onboard software like OnStar will then automatically report the odometer readings in the future, showing the mileage driven by the policy holder. For those policy holders who don’t have this technology installed in their cars, insurance companies will use other verification systems such as the California Smog Check which offers similar data.
In this context, low mileage drivers are defined by State Farm as those people who travel less than 2,000 miles in a year. These low mileage drivers can receive a discount of up to 45% on their 6 months premium. For a lot of customers, this could translate into a lot of savings.
The second largest insurer in the state, The Auto Club, has estimated that policy holders could save anywhere between 1 and 10.5% depending on the amount of driving they do in a year. This would mean an average of 68 dollar saving compared to traditional auto insurance rates. The insurance company is expecting 1/4th of its current policy holders to sign up for this new policy.
