Pay-As-You Go Auto Insurance Could Be Approved In California

By the end of 2009, California drivers may have the option of purchasing auto insurance by the mile. It’s much like the way that cell phone users can purchase minutes to talk.

Under new regulations proposed by the state insurance commissioner Steve Poizner, auto insurance companies may offer the so-called pay-as-you-drive policies for drivers, potentially reducing insurance costs simply by driving less.

At present, the regulations are not set in stone. Drivers, consumer advocates, environmentalists, and insurance companies will have a chance to review the rules until July 9. The insurance commissioner in California is responsible for approving any changes to policy rates for the state. Poizner said the new regulations could be in effect by mid-November.

Supporters believe that the plan may have other benefits. Obviously, if drivers pay as they go, then may be end up being fewer cars on the road. With fewer cars jamming the streets and roadways, serious traffic congestions could be effectively ended in some areas. Environmentalists like to note the possible ecological benefits such a reduction of greenhouse gas emissions.

While the savings to the average motorists using such pay-as-you go plans was not enumerated by Poizner, some indicators based on the use of temporary pilot programs in other states and in countries like Canada, Japan, and parts of Europe have noted measureable savings. Drivers with longer job commutes or who live in more remote areas will probably find it more economical to stay with conventional insurance rates rather than mileage-based rates.

The proposed regulations were the product of a series of gatherings, workshops, and special hearings attended by major insurance companies over the last year. Most providers have offered preliminary support for setting insurance rates by the mile.

Those motorists who opt for a pay-as-you-drive policy would have several options for having their vehicle mileage measured under the regulations. Those options include odometer readings taken by insurance companies, auto-repair shops or smog-check stations. Drivers can also install electronic transmitters that automatically report mileage to insurers. Insurers, however, would be prohibited from using such devices to monitor where customers travel.