The pay-as-you-drive program will enable insurers to offer a new option for consumers who choose to take advantage of it. Companies can continue to offer traditional insurance based on estimated mileage. However, as soon as regulations go into effect, they can also offer a verified mileage program instead of, or in addition to, a traditional estimated mileage program.
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 August 2009. Revisions made to the regulations in August are reflected in the final regulations.
The 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 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 final 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.
The final regulations incorporate changes based on feedback from consumer groups, the insurance industry and other interested parties. The primary changes from the initially proposed regulations to the final, submitted regulations include:
- Language that encourages insurers to offer a price per mile, or prepaid mile option for drivers.
- An allowance for insurers to apply to sell mileage verification policies in addition to mileage estimation policies; or they may apply to sell mileage verification policies only.
- Language that requires an insurer that offers a pay-as-you-drive plan to specify when filing with the department the exact types of mileage verification the insurer will accept.
- The final regulations explicitly require insurers to offer and make available all mileage verification methods equally, to all applicants and insured drivers with a mileage verification policy.
- The use of location data is still prohibited for most purposes. The final regulations make it clear that they do not prohibit insurers and motor clubs from offering optional devices to drivers to identify the location of the vehicle for the purpose of an emergency road service, theft service, map service or travel assistance service.
Last August, the Environmental Defense Fund estimated that if 30% of Californians participate in pay-as-you-drive 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.
The final regulations will go into effect pending approval by the Office of Administrative Law, which has 30 days to approve the regulations. As soon as regulations are in effect, which could be as soon as October 2009, insurance companies may apply to offer pay-as-you-drive plans. Pending the Commissioner's approval of a pay-as-you-drive insurance plan submitted to the Department, consumers will be able to purchase a pay-as-you-drive policy.