Calif. Commissioner Creates ‘Pay-As-You-Drive’ Regulations

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SACRAMENTO, CA —  California Insurance Commissioner Steve Poizner announced the creation of new regulations to bring "pay-as-you-drive" automobile insurance to the state while addressing some of the concerns of consumer groups and privacy advocates.

Joining Poizner in announcing the regulations was Assemblyman Jared Huffman, D-6th Dist., who pulled his own legislation, A.B. 2800, in favor of Poizner’s move. Huffman’s bill would have authorized pay-as-you-drive (PAYD) insurance plans using electronic monitoring devices. The legislation had passed the full Assembly and the Senate Appropriations Committee.

"I’m glad that my legislation… helped move us in a direction that all the stakeholders can support," Huffman said in a statement.

Environmental advocates support pay-as-you-drive plans as a means to encourage less driving and greenhouse-gas emissions, particularly in a time when gasoline prices are still near record highs. Consumer and privacy-rights groups fear the potential tracking of data including mileage, speed, acceleration, location and time of day.

Representatives of Consumer Watchdog, which criticized Huffman’s bill, spoke positively of the Poizner regulations.

"Regulations that implement Proposition 103’s mandate that insurance rates reflect a driver’s mileage will lower auto insurance premiums, particularly when the high cost of gasoline is encouraging people to drive less," said Harvey Rosenfield, the author of Proposition 103 and founder of Consumer Watchdog.

Under the new regulations, consumers could verify mileage by odometer readings, automotive repair records, or a technological device used to collect mileage data. They prohibit insurance companies from requiring policyholders to participate in a pay-as-you-drive program.

According to the Environmental Defense Fund, if 30% of Californians participate in PAYD plans, it would be the equivalent of taking 10 million cars off the road. Poizner said the California Air Resources Board has recommended the adoption of PAYD as a way to meet future climate change gas reduction targets.

Companies including State Farm, the state’s largest automobile insurer, and Progressive, which is rolling out its pay-as-you-drive MyRate plan in a handful of states, have expressed interest in implementing PAYD policies in California.

Poizner said the regulations should be implemented by fall 2009, at which time insurers could begin implementing the new plans.

The top five writers of private passenger auto insurance in California in 2007, based on A.M. Best Co. state/line data, were: State Farm Group, with a 12.3% market share; Farmers Insurance Group, with 10.9%; Mercury General Group, with 9.8%; Allstate Insurance Group, with 9.1%; and Auto Club Enterprises Insurance Group, with 8.9.%.

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Consumer Watchdog
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