California Ponders Environment-Friendly Auto Insurance
August 16th, 08The state of California is considering a new kind of insurance policy, already available from some insurance companies in 34 of the 50 states. It is also an option in many European Union countries, in Canada, and in Japan. This new policy is environmentally sound and reflects the higher costs of driving an automobile in today’s geopolitical and economic conditions. Moreover, it can save policyholders as much as $650. This new policy type is known as “pay-as-you-drive.”
Insurers that implement “pay-as-you-drive” policies employ a tracking device, which policyholders plug into their car. The device then measures how often and for how many miles that policyholder’s car is driven. The insurance companies then calculate the policyholders’ premiums accordingly. The less a customer drives, the that customer has to pay in premiums. GMAC Insurance Group, an insurance provider that has started to offer customers this plan, cited savings of between 13% and 54% among customers using the new plan.
Those who endorse pay-as-you-drive auto insurance point out the fact that this new system does more than save customers money. By encouraging customers to monitor and try to minimize the amount of driving they do, the system aids the environment by the lowering amount of harmful emissions issued by gas-powered vehicles. It also decreases the amount of traffic–a particularly beneficial effect in some California urban areas, such as Los Angeles. The Brooklings Institution, a group of theorists in Washington State, calculates that pay-as-you-drive policies, if widely implemented, can save up to $52 billion nationwide. These savings would come from the amount of vehicular accidents, pollution, and expenditures on crude oil from abroad that the policies would prevent.
The opponents of pay-as-you-drive admit the system’s environmental benefits and potential to save motorists’ money in some parts of the country. However, they worry that other parts of the country–rural areas with few nearby amenities, where people rely on their cars to drive long distances–will suffer higher rates as result of pay-as-you-drive policies. Furthermore, they worry that insurance companies’ monitoring of customers’ driving might be the gateway for major invasions of customers’ privacy.
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