"Pay as You Drive is a cutting-edge program that will create financial incentives for California motorists to drive less, leading to lower-cost auto insurance, less air pollution and a reduced dependence on foreign oil. After releasing the last draft of the Pay-As-You-Drive regulations, we received dozens of comments from consumer groups, the insurance industry and other interested parties. After careful consideration of these comments, I have issued revised regulations that will continue to protect the privacy of California drivers while paving the way for insurance companies to offer innovative Pay as You Drive and 'price per mile 'insurance."
The revised regulations can be found by selecting this link.
The pay-as-you-drive program will enable insurers to offer a new option for consumers who prefer pay-as-you-drive insurance. Companies can continue to offer traditional insurance based on estimated mileage. However, now they can also offer a verified mileage program instead of or in addition to a traditional estimated mileage program.
Commissioner Poizner originally proposed the "pay as you drive" regulations last summer to make a new, more mileage-accurate auto insurance option available for California consumers. The regulations were last revised in June 2009. Pay-as-you-drive insurance is a way for motorists to pay more accurately for the coverage they need by linking their premium more closely to the number of miles they actually drive. In addition, the regulations allow insurers to offer programs for consumers to pay for their insurance on a "price per mile" basis.
The revised regulations also allow insurers to offer discounts to drivers who opt to purchase a mileage verification policy. Any auto insurance program, including a pay-as-you-drive program, must be approved by Commissioner Poizner before being placed on the market for consumers to purchase.
If a driver elects to purchase a pay-as-you-drive policy, the insurer would verify the driver's miles through a variety of methods, including odometer readings taken by the insurer or its agents or vendors, auto repair dealers, smog check stations, self-reporting by the policyholder or a technological device placed in the consumer's vehicle. The amended regulations explicitly prohibit insurers from gathering location data from consumers for automobile rating purposes through the addition of a technological device. The regulations would not affect existing multipurpose devices such as GM's Onstar system or the use of a technological device as part of an emergency roadside assistance program.
In addition to the clear benefits of increasing options for consumers, especially options that allow consumers to save money by only paying for the insurance they use, pay-as-you-drive coverage has been touted by environmental groups as a way to help the environment. Last August, the Environmental Defense Fund estimated that if 30% of Californians participate in this voluntary coverage, California could avoid 55 million tons of CO2 emissions between 2009 and 2020, which is the equivalent of taking 10 million cars off the road. This would save 5.5 billion gallons of gasoline and save Californians $40 billion dollars in car-related expenses. Additionally, the California Air Resources Board has recommended the adoption of pay-as-you-drive as one of the means to meet future climate change gas reduction targets.
California law has procedures in place to allow for public involvement in adopting new regulations, including public comment on the revised regulation. After these procedures are completed, the regulations will take effect as soon as possible. Insurers will then be able to apply to offer pay-as-you-drive insurance in California. The regulations are anticipated to take effect in fall 2009.