Pay-As-You-Drive Auto Insurance Revs Up

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Come next year, you could be saving money on insurance by having a pay-as-you-drive policy under regulations proposed Wednesday by Insurance Commissioner Steve Poizner.

"I am thrilled to pave the way for California drivers to obtain insurance that is more environmentally friendly and more accurately reflects driving habits," Poizner said in a news release.

Once the regulations are adopted following a public hearing process, pay-as-you-drive insurance could be available no later than fall 2009.

The new regulations would allow insurance companies to offer this as an option to estimated annual mileage coverage, which would still be available.

Motorists who sign up for pay-as-you-drive insurance are likely to cut down on their driving. If 30 percent of California drivers signed up for this option, it would result in the equivalent of taking 10 million cars off the road while saving $40 billion in car-related expenses between 2009 and 2020, said the Environmental Defense Fund.

The proposed regulations would make it possible for insurance firms to verify mileage by odometer readings or automotive repair records. The third way would be a technological device provided by the insurer that accurately collects mileage information. However, it would not be a GPS device that can track where drivers go.

"I will not approve any auto insurance policy that aims to utilize GPS devices in order to obtain location data from consumers," Poizner said.

The insurance industry, consumer groups and environmental groups are supportive of pay-as-you-drive insurance, which is offered in more than 30 other states.

"This is about mileage. (The proposal is) definitely moving in the right direction," said Carmen Balber, an advocate at Consumer Watchdog.

"We are very supportive of the concept of trying to get a more specific way to gather mileage verification information," said Dan Edwards, spokesman for the Personal Insurance Federation of California.

The proposal stems from legislation authored by state Assemblyman Jared Huffman, D-San Rafael, which would have made it possible for insurers to have different rates for policies based on driver-estimated mileage and insurer-verified mileage.

While the legislation was backed by environmental groups, some consumer groups had concerns. It was withdrawn in conjunction with Poizner’s proposal.

"The bill allowed insurance companies to require drivers to place the technology in the car or not get the (pay-as-you-drive) discount," said Balber. "It looks like consumers will have options under these regulations. "

Still, work needs to be done to ensure the proposed regulations includes privacy protections, she said.

Eve Mitchell covers personal finance and real estate. Reach her at 925-952-2690 or [email protected]

Consumer Watchdog
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