September 3, 2009
California Insurance Commissioner Poizner Issues Final Pay-As-You-Drive Regulations.
Full regulation in printable form may be found here.
These new regulations will enable insurers to offer consumers to choose rates based on actual miles driven as opposed to estimated miles driven. These pay-as-you-drive regulations were originally proposed by Commissioner Poizner in September 2008.
“Pay as you drive is an innovative way to 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,” said Commissioner Poizner. “I am pleased with the final regulations I have submitted today, after months of working with consumer groups and other valuable parties. I look forward to approving the first pay-as-you-drive program for California drivers.”
Insurers will now have the option to offer a verified mileage program instead of, or in addition to, a traditional estimated mileage program.
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 Commissioner Poizner before being placed on the market for consumtion.
If a driver elects to purchase a pay-as-you-drive policy, the insurer would verify the driver’s miles by one of several possible methods: odometer readings taken by the insurer or its agents or vendors, auto repair shops, smog check stations, self-reporting by the policyholder or a technological device placed in the consumer’s vehicle. The regulations explicitly prohibit insurers from gathering location data from consumers for automobile rating purposes (Redlining) through the addition of a technological device. The regulations would not affect existing multipurpose devices such as GM’s Onstar system or other devices used as part of an emergency roadside assistance program.
Drivers are expected to be incentivized to drive fewer miles. 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 carbon gas reduction targets.