California has just completed hearings on a proposal to have insurance companies sell “pay as you drive” plans that will offer a greater spread in rates than currently. Potential big winners are those who drive relatively fewer miles, while people with long commutes could see an increase in rates.
The proposed state regulations, which could be in place by this fall, allow automobile insurance companies to offer the new plan in the country’s largest market, and one where uninsured drivers remain a problem.
The Brookings Institute has been suggesting usage-based insurance rates as a national policy as a way to get people to drive less, which means making it more expensive to drive. A trend appears to be emerging that has various government entities saying that increasing the cost of driving is a good way to reduce greenhouse gases. It is also, of course, a way to increase falling revenues, as actual miles driven are dropping as the Great Recession drags on, although this rarely stated in official announcements.
Under the California plan, 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. The insurance industry has generally positive opinions about the program, particularly after cell phone type billing was added to the proposal.
“These regulations expand insurance options for consumers, allowing a freer market to create incentives for driving less,” said California Insurance Commissioner Steve Poizner. “By empowering consumers to take charge of their insurance bill, we may see fewer cars on the road; which means cleaner air, safer streets and lower premiums.”