The less you drive, the less you may have to pay for auto coverage, under a new plan proposed by the state’s insurance commissioner Wednesday.
The program, dubbed “pay as you drive” in which drivers document their mileage and pay accordingly, will encourage motorists to drive less, saving fuel and reducing carbon emissions, environmental groups said. In doing so, they also would lower their insurance premiums.
The plan is already an option from several insurance companies in 34 states as well as Canada, Japan and Europe.
California Insurance Commissioner Steve Poizner announced the plan Wednesday along with state Assemblymember Jared Huffman, D-San Rafael, who dropped a Senate bill this week that duplicated Poizner’s plan. The regulations will be voluntary and are expected to take effect by fall 2009.
The Brookings Institution estimates that nearly two-thirds of California families would save money under Poizner’s plan. The Washington, D.C.-based research organization said the typical family would save $276 annually per vehicle.
“It was clear we both wanted to get to the same place and we moved forward on parallel tracks,” Huffman said. “It was a race to good public policy, and the winners of that race were the consumers and the environment.”
Huffman’s bill was amended earlier this month to drop a controversial clause of tracking miles through a global positioning device. The original bill drew criticism from Consumer Watchdog, a Santa Monica-based nonprofit, which said the practice would constitute an invasion of privacy.
While insurance companies already take mileage into account when setting rates, pay-as-you-drive links premiums more closely with the actual number of miles driven. Under the new regulations, consumers could verify mileage by odometer readings, repair records or a technological device used to collect mileage data. Poizner made it clear, however, that insurance companies could not require tracking software.
“It is vital that the privacy of drivers remains intact. I will not approve any auto insurance policy that aims to utilize GPS devices in order to obtain location data from consumers,” he said.
Consumer Federation of America Executive Director Richard Holober, a former Assembly candidate from San Mateo County, called the exclusion of GPS a victory for privacy rights.
“We were concerned that drivers with privacy concerns would suffer discrimination by not being able to take advantage of lower rates,” he said. “We want to make sure the method to report mileage is available to everybody.”
While the pay-as-you-drive system has been criticized by some as unfair to those in rural areas, Huffman said it will be a boon to most local motorists.
“Bay Area drivers will benefit enormously because we have access to public transportation and we can make choices to reduce miles driven,” he said.
By the numbers
Environmental and economic benefits:
- $276: Estimated amount saved per household per year on insurance
- 55 million*: Tons of carbon dioxide could be cut between 2009 and 2020 (akin to taking 10 million cars off of the road)
- $40 billion*: Amount that could be saved in car-related expenses
*If 30 percent of Californians participate
Source: Environmental Defense Fund, Brookings Institution