Updated below California Insurance Commissioner Steve Poizner has approved regulations which could lead to a pay-as-you-drive insurance system in California. The idea has the potential to save consumers tons of money but may lead to big-brotherish vehicle tracking systems.
The concept is this: Consumers currently pay for a generic pile of insurance to cover an unknown number of miles every payment period, if the insurance was purchased in blocks of miles up-front or metered and paid at the end of a period, the consumer could potentially pay for exactly the amount of insurance they need, rather than over pay for miles they don't drive. It has the added "benefit" of encouraging drivers to put fewer miles on their cars and thus reduce roadway congestion. This kind of system is currently in testing in Texas with a company called MileMeter, which has customers report mileage regularly via digital photograph of their odometer and bills the consumer accordingly.
We are torn on this concept. On the one hand, it could certainly reduce the operating cost of a vehicle, or at least match driving habits to insurance coverage. It would also conceivably clear the roads of drivers just out for a joyride and reduce overall congestion.
On the other hand it would make going out for a joyride even more expensive than just paying for gas. We're also leery of any kind of GPS tracking system, regardless of potential benefit. A large percentage of potential consumers feel the same way about tracking, and it's been suggested the mileage verification could just be done by agents or at regular emissions inspections.
Regardless, this is one of the first times in a long time we're genuinely torn about a proposal. What do you think?
Update: Commissioner Steve Poizner's Press Secretary spotted our post and wanted to clarify a few things about the new rules, take a look:
Just saw your post and wanted to offer a few clarifications.
1. Under the current system, California drivers estimate their annual mileage and their rates are based on that. However, there is no reward for driving fewer miles. In addition, mileage bands are very large. One of the largest insurers in the state has just two categories: less than 7500 and more than 7500. So if you drive 20,000 miles a year and something changes (perhaps a change in employment?) and you go down to 12,000 miles a year, your insurance rates may not be any lower.
2. GPS is a concern that we received many comments on. Commissioner Poizner, prior to elected office, founded a company that brought GPS technology to cell phones. He knows the power of that technology. Because of that, the regulations expressly prohibit using GPS or collecting any data besides just the number of miles driven. The one exception is for multipurpose devices such as GM's Onstar. Onstar may know where you are (how else would it summon emergency help), but that information may not be recorded or used by the insurance companies.
3. While you did not cover this topic, California law requires that driving record, miles driven and years experience be the top three factors in determining your insurance rates. That will not change under these regulations.
Please let me know if you have any questions.
Office of Insurance Commissioner Steve Poizner
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