Pay-by-the-mile Policies Change California Auto Insurance


The resolution to allow pay-by-the-mile automobile insurance policies in California seems to be one of 2009’s insurance innovations. Reports say that Insurance Commissioner, Steve Poizner, finally decided to allow the change to take effect immediately.

Pay-by-the-mile Policies Change California Auto InsuranceIndustry insiders say that allowing pay-by-the-mile policies is good news for auto insurance customers. Letting pay-by-the-mile polices to be offered has been in the works for more than a year now, undergoing scrutiny, debate, and fine-tuning by auto insurance companies and state officials. Aside from major financial benefits for policy holders, this new rule provides a new option for car owners and a healthier competition for insurance companies. Now that offering pay-by-the-mile policies are approved in California, major companies who offer motorists to purchase 1,000 to 6,000 insured miles are now planning to operate and offer their services in the state.

According to reports, commuters and environmentalist groups publicly showed their appreciation for Commissioner Steve Poizner’s decision to allow this change to finally take effect.  Environmentalist groups said that pay-by-the-mile auto insurance will create an innovative incentive scheme for motorists if they drive less, which in turn will cut down pollution and congestion in public roads. Motorists who believe in fairness and equality also welcomed this new approach to California auto insurance. Consumer surveys show that almost 80% of car owners believe that this new policy will bring equality in auto insurance; drivers who use the same routes and travel limited distances should be entitled to lower car insurance costs – they believe that driving lesser distances poses less risks.

Meanwhile, while much of the public rejoices the change in California insurance, a group against pay-by-the-mile policies is also expressing grief over the decision. John Garamendi, Poizner’s predecessor as insurance commissioner, has lobbied successfully for the prevalence of using zip codes to compute for insurance policy rates. Reports say that the question now is whether the introduction of pay-by-the-mile insurance policy is really beneficial for the majority or not.

A Brookings Institution study showed that using pay-per-mile auto insurance would reduce premiums for approximately 64% households in California. The remaining 36% would have to suffer more expensive rates because they drive relatively longer distances, because of the nature of their jobs or length of their going back and forth to school or work.

Meanwhile, state authorities are showing that they are not affected by the reaction of motorists and private organizations. It has been reported that Commissioner Poizner believes that his decision has opened a big opportunity for motorists to get a huge discount on their auto insurance by simply driving less.