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Print 102 comment(s) - last by Kenenniah.. on Nov 11 at 2:04 PM

Watchdog group says new rules give insurance companies all the power

In many states in America, auto insurance is a requirement. This is a good thing since that means any accidents that happen will be sure to have coverage by both drivers. The problem according to some drivers and insurance companies is that drivers that drive more miles and have a higher chance of accidents pay the same amount as drivers who drive significantly less.

California is closer to allowing insurance companies to sell insurance by the mile to drivers. This would mean that drivers who drive more would pay more than others would. The Sacramento Bee reports that Insurance Commissioner Steve Poizner has released regulations that will permit and authorizes insurance companies to verify mileage as part of insurance plans based on miles driven.

The ultimate goal of the new insurance plan in California isn’t to save drivers money, but to encourage people to drive less. Less driving will reduce the pollution in California, the number of accidents and ease traffic congestion according to lawmakers. California isn't the only state with insurance plans based on miles driven. Texas has such plans provided by a company called MileMeter that offers six month policies with chunks of mileage ranging from 1,000 miles to 6,000 miles.

MileMeter CEO Chris Gay said, "We absolutely anticipate coming to California." He continued, "Our take is that half the market out there is being overcharged and underserved – and that's who we aim to address."

Conventional mileage based policies would reportedly take an estimate of projected mileage for a year and then refund or bill the driver depending on the actual miles driven. Mileage could be verified in several ways such as at smog check stations, DMV records, and via electronic devices attached to the car.

The fear with mileage based insurance plans is that there will be a push to charge drivers to drive longer distances each year more money in insurance rates. However, there is reportedly no plan to do that at this time.

Two thirds of homes in the country would save about $270 per year per car with mileage based plans according to a study from Brookings. However, Carmen Balber from Consumer Watchdog says that the new policies cater to the insurance industry and don’t require the premiums to reduce when driving does.

"I think the regulations were drafted to guarantee that insurers win, because they were left with all of the choice," Balber said.

Insurance companies are taking the new proposal seriously and Michael Gunning, VP of the Personal Insurance Federation of California said, "Given the competitive nature of the marketplace, I think this is going to be a selling point for companies."

The members of the federation write more than 50% of all auto policies in California. Drivers concerned about their privacy with policies requiring a device be connected to the car need not be concerned according to lawmakers. Regulations prevent the devices from recording location information about the vehicle. However, Balber maintains that the mileage devices give insurance companies a foot in the door to push for the right to collect other data. Future policies could possibly rate drivers higher if they drive in high crime areas frequently.

There are also proposals in the works that would regulate gas taxes on a per-mile basis using GPS tracking.


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This is new?
By Demon-Xanth on 11/10/2009 11:01:06 AM , Rating: 5
Funny, my mileage already affects how much I pay per year.




RE: This is new?
By mdogs444 on 11/10/2009 11:03:56 AM , Rating: 3
Yup, the insurance company asks this in their list of initial basic questions while estimating your policy.

I have no interest in this type of model though. I prefer to pay up front, for the entire year, and be done with it.

The gas tax by the mile though is nothing more than an additional tax scheme, and sour at that. They want to charge you taxation for driving your own car on your own land (think farmers), own driveway, and even private parking lots and private subdivisions - none of these areas are supported by public funds.


RE: This is new?
By mdogs444 on 11/10/2009 11:06:47 AM , Rating: 1
Not to mention - what do you do if you're out on a road trip and your policy expires without you realizing it, then you get into an accident because you went over by 8 miles?

I don't know. I guess it could be cheaper for low mileage drivers and people with second cars...but for the average 15,000 mile per year driver, I can't see this being very beneficial. Why buy a 6,000 mile chunk when you can just pay for 6 months and receive a bill during month 5?


RE: This is new?
By exploderator on 11/10/2009 12:46:11 PM , Rating: 2
Second Cars.... YES!!!

How about insurance per-person though?

Great Idea for many of us in rural areas. Per-vehicle insurance is the only hurdle against sometimes using a more efficient smaller vehicle for many people. We sometimes need a truck, but very often could do with a small car, bike, or even a scooter.

But the price of per-vehicle insurance is an artificial hurdle to our ability to make the better more flexible and appropriate choice of what to drive, when, and why. We just end up in the gas-hogging trucks all the time instead.

I have a wonderful old van that has been parked for a few years because it's too expensive to afford 14 mpg as my main vehicle, or $600/y insurance for an infrequently used second vehicle. I would buy an ultra compact and insure both if I could pay per mile (or per person - myself). It's an either / or decision that I shouldn't have to make.

That way I could hit the dump or the hardware store with my van, and spend the other 99% in an efficient compact. Best of both worlds. I have a compromise vehicle instead, that can tow a trailer, and is my only vehicle, but gets 23 mpg instead of 45 mpg for most of my driving. I would burn WAY less fuel, save tons of money, and cause less road wear and congestion in a Geo for 95% of my miles. And by buying and maintaining two vehicles, what money I would not be saving would be going to an industry that needs the business. It's not like I don't have space to keep them both parked.

I know that we rural folks are but an afterthought for the city-slicker regulators that run our world, and that smog in their rat-races is their biggest concern. But overall fuel consumption is a desperate issue for a continent with a middle east oil addiction, and rural miles in big pickups add up faster than you might think.


RE: This is new?
By Spuke on 11/10/2009 1:27:00 PM , Rating: 2
quote:
and rural miles in big pickups add up faster than you might think
Yes they do indeed. Although my wife and I have worked in the same area since I've move here, we've managed to shave off 15k miles a year in driving between the two of us. My wife shaved off 5k just by becoming a teacher and I have yet figure why I'm driving 10k less a year. I have the same commute. The only thing I can think of is I'm taking less long trips with my car but I'm using my wife's truck instead so there should be more miles on hers but not really. We're definitely driving less somewhere.


RE: This is new?
By the goat on 11/10/2009 2:59:54 PM , Rating: 2
quote:
But the price of per-vehicle insurance is an artificial hurdle to our ability to make the better more flexible and appropriate choice of what to drive, when, and why.


When I added a second vehicle to my insurance the, "multi-vehicle discount" was larger then the premium increase for the second vehicle. So the two vehicles together were cheaper to insure then insuring the car by itself.

Also a couple of years ago I bought a brand new truck (also new redesigned model year) and my insurance company gave me a, "vehicle experience discount." I'm not sure how I had experience driving a vehicle before it existed?


RE: This is new?
By exploderator on 11/10/2009 6:39:39 PM , Rating: 2
Lucky you, "multi-vehicle discount". I live in BC, and while our socialized auto insurance averages 30% cheaper than the privatized insurance of other provinces, it doesn't innovate creative social policies very well for rural buyers, who are only 15% of the population and shrinking. Which is sad, given that a socialized industry has the perfect opportunity to tweak policies for social reasons other than pure profit and competitiveness. Not that the privatized insurance does that either in Canada, of course.

I don't know why your insurance company sees fit to make two vehicles cheaper to insure than one. Any ideas? Customer loyalty perhaps? Pure business error? Taking the former too far by way of the latter?


RE: This is new?
By Kenenniah on 11/11/2009 2:01:01 PM , Rating: 2
Artifical hurdle? When talking about comprehensive and collision coverage, don't you think value of the vehicle matters? Of course it has to be per vehicle, as the amount of risk involved changes with the value.

How about liability only insurance? Which vehicle is going to cause more damage to other vehicles and people in an accident, a big truck or a scooter? How about safety features such as stability control, anti-lock brakes, etc. for helping to avoid accidents in the first place?

Bottom line, the vehicle you are driving affects the statistical risk to an insurance company greatly.


RE: This is new?
By SiliconAddict on 11/10/2009 12:13:37 PM , Rating: 2
They stopped asking me this 5 years ago. I'm never asked what my mileage is anymore. FYI- I've got Liberty Mutual in, MN


RE: This is new?
By Jeffk464 on 11/10/2009 11:10:21 AM , Rating: 2
I barely drive my car at all so I'm all for it. But ya, I also get a discount for low miles.


RE: This is new?
By 91TTZ on 11/10/2009 1:58:19 PM , Rating: 4
quote:
I barely drive my car at all so I'm all for it.


Unfortunately, the law wouldn't require that they charge you less for driving less miles, but it would allow them to charge you more if you drive more miles.

And you already see how insurance companies behave, they're scammers. This will result in higher insurance prices for most people.


RE: This is new?
By Mint on 11/10/2009 4:39:31 PM , Rating: 2
Then why didn't they jack rates on you last month? And every month before that?

HINT: It's called competition.

This is about companies like Progressive and MileMeter trying to steal certain customers from other companies because they have a way of verifying the mileage and know that these people cost much less to insure than their current premiums indicate.


RE: This is new?
By weskurtz0081 on 11/10/2009 11:13:31 AM , Rating: 2
Yeah, I thought this was common practice! Drivers that drive more are a higher risk to insurance companies, so they usually pay a little more. I don't understand why anything is wrong with that, every time I have been insured that was one of the questions asked.


RE: This is new?
By Brandon Hill (blog) on 11/10/2009 11:17:38 AM , Rating: 2
But the insurance company really has no way of verifying that data, right? I can't recall Nationwide ever contacting me to verify my mileage driven during the year to see if matches what I put down when I originally applied for a policy.

How does the insurance company CURRENTLY know how many miles are on your car? I mean, you could bull**** for all they know. The method proposed seems to actually verify this data.


RE: This is new?
By mdogs444 on 11/10/2009 11:22:29 AM , Rating: 2
quote:
How does the insurance company CURRENTLY know how many miles are on your car?

Most insurance companies run checks on your car when you provide them with the VIN number. Then they can find out if its been in any other accidents, and the mileage on the car during service dates - all providing they were reporting as they are supposed to.

You know that some companies can charge higher rates on cars that may have already been in accidents because they are not as safe as the car was prior to that.


RE: This is new?
By Brandon Hill (blog) on 11/10/2009 11:25:09 AM , Rating: 3
If you service your car at some mom and pop shop, or perform your own maintenance (as many enthusiasts do), they wouldn't know jack squat :)


RE: This is new?
By mdogs444 on 11/10/2009 11:28:28 AM , Rating: 2
As i said:
quote:
all providing they were reporting as they are supposed to.


However, I do not change my own oil anymore. The car manufacturers can decline to cover your warranty work if you cannot provide proof of maintenance. Showing them a Kmart receipt for two oil filters and 5 quarts of oil does not exactly prove that you did it.


RE: This is new?
By bldckstark on 11/10/2009 11:54:06 AM , Rating: 2
They can also deny your warranty claim for driving over the speed limit, not changing your air filter at the specified rate, and determine after the fact that your driving type is considered to be extreme conditions and therefore you didn't perform enough maintenance.

They have a thousand ways to not pay for your warranty work. That doesn't mean that they will. You are at their mercy no matter what you do.

It is highly unlikely that an engine failure will occur that could be identified as not changing your oil often enough. At least not likely enough to be concerned about changing your oil at home.

That's just my take on it anyway. I put some thought into exactly your point and decided against worrying about it.


RE: This is new?
By Spuke on 11/10/2009 12:11:45 PM , Rating: 2
quote:
Showing them a Kmart receipt for two oil filters and 5 quarts of oil does not exactly prove that you did it.
Most of the dealerships have told me that is enough. Although with my present car, I have them do the oil changes. Less hassle with disposing old oil.


RE: This is new?
By frobizzle on 11/10/2009 11:58:29 AM , Rating: 2
In New York (and other states as well) you have to bring your vehicle in for an annual safety inspection. Among other things, the mileage is recorded and sent to the state. It would require little effort for insurance companies to track individuals mileage history.


RE: This is new?
By JediJeb on 11/10/2009 2:19:14 PM , Rating: 2
quote:
Then they can find out if its been in any other accidents, and the mileage on the car during service dates - all providing they were reporting as they are supposed to.


I never knew they were supposed to report any servicing. Besides I have always done all my own repairs, even things like changing a rear axle and engine. Body work is about the only thing I can't do easily. But then I haven't purchased a vehicle since 1996 so maybe it is something they do now days.


RE: This is new?
By Fracture on 11/10/2009 3:52:18 PM , Rating: 1
I tend to believe that those who drive more are well-practiced and do just fine until someone who hardly drives at all crawls their way into the far left lane of an interstate to do 50 mph.

Realistically - I understand the added exposure due to driving more but this company doesn't seem to cater to the average person - a 20 mile commute 2 ways every day quickly adds up to 15k miles per year with minimal extra travel. And remember that if only the people that if this works anything like an HMO you need to offset low-cost policies with high-cost ones, only no one that drives enough to pay more will sign up with them!

IMO - Make road tests harder. Fewer drivers means fewer accidents.


RE: This is new?
By FITCamaro on 11/10/2009 5:18:13 PM , Rating: 2
Everytime that's pushed for people scream. People view driving as a right these days. Not the privilege it truly is.

But yes it's incredibly sad how pathetically easy driving tests are in most areas of the country. Mine didn't even involve going on the road. Thank god my parents taught me to drive.


RE: This is new?
By Mint on 11/10/2009 11:40:02 AM , Rating: 3
People barely get any discount for driving less. Your premium goes down around 20% for driving one third the mileage (I'm a student that does around 3500 per year).

Right now, low mileage drivers are subsidizing high mileage ones. I think one of the reasons is that insurance companies are worried about odometer fraud if they offer bigger discounts, so it's just a nominal discount right now. That's why these companies that are trying to steal these low risk, low mileage customers from the big players are requiring devices to track mileage.

I, for one, welcome the choice. I'm not paranoid about a company tracking me if they say they aren't, so I'll gladly save a few hundred dollars per year.


RE: This is new?
By Spuke on 11/10/2009 12:17:46 PM , Rating: 2
quote:
That's why these companies that are trying to steal these low risk, low mileage customers from the big players are requiring devices to track mileage.
I don't want any device put on my car that hasn't been R&D'd by the cars manufacturer or another VERY competent and well established aftermarket manufacturer. That said, if the device is a standalone unit, meaning it does not need to be connected to any of the cars mechanical or electronic systems, I might be ok with it.


RE: This is new?
By Mint on 11/10/2009 12:51:24 PM , Rating: 1
Then don't buy that insurance!

All I want is for someone to offer this service, not mandate it. Apparently legislation is needed for companies to offer it, so let's have it happen.

It absolutely baffles me that so many conservatives on DT are dismayed with this. Maybe they're high mileage drivers, but in that case they've been mooching off the system for years. They make all this hooplah about being against subsidies, but when the one that they've been benefitting is on track to disappear they bitch to no end.


RE: This is new?
By mdogs444 on 11/10/2009 1:07:26 PM , Rating: 3
I don't see anyone "mooching" or "benefiting" from any subsidies here.

The bottom line is that there are many insurance companies out there, so competition is alive and well. You choose who your carrier is. You choose to go with them based on the rate and services they offer. I don't see any conservatives setting the insurance premium rates for themselves, do you?

We are not against any forms of new ideas or methods for competition. What we are against is a new method being forced by legislation to encourage you to drive less. That is nothing short of social manipulation by legislation. If they want to offer this service as well as normal insurance methods - then go for it. But for the government to pass a law requiring me to put some kind of GPS device in my car to track my miles, where I go, etc .... and then charge my insurance based on it and potentially my gasoline taxes based on it...well then I have a big problem with it.


RE: This is new?
By Mint on 11/10/2009 2:25:33 PM , Rating: 1
Did you read this part of the article:

California is closer to allowing insurance companies to sell insurance by the mile to drivers. This would mean that drivers who drive more would pay more than others would. The Sacramento Bee reports that Insurance Commissioner Steve Poizner has released regulations that will permit and authorizes insurance companies to verify mileage as part of insurance plans based on miles driven.

The legislation is merely allowing PAYD insurance plans with mileage verification. What else am I supposed to think when people are against this? AFAICS they don't want to pay the true cost of their mileage. There is no forcing of anything here.

If many people don't want data tracking devices, then competition will provide insurance without mileage verification, just like prepaid per-minute cell plans haven't replaced monthly plans. If/when low mileage drivers with lower claims leave them, though, they will jack up rates to stay in business, but that's the free market in action.

Regarding subsidies, read this economically focused article that mostly steers clear of environmental aspects:
http://www.nytimes.com/2008/04/20/magazine/20wwln-...


RE: This is new?
By Spuke on 11/10/2009 1:29:32 PM , Rating: 2
quote:
Then don't buy that insurance!
Go back the read my entire post.

quote:
It absolutely baffles me that so many conservatives on DT are dismayed with this.
I'm absolutely baffled by the amount of people that can't friggin read! And who the hell said I was a conservative?


RE: This is new?
By Mint on 11/10/2009 1:58:55 PM , Rating: 2
I wasn't necessarily directing that at you.


RE: This is new?
By FITCamaro on 11/10/2009 5:23:17 PM , Rating: 2
What conservatives generally are against is the government mandating things. I know I sure as hell don't want a GPS tracking device on my car that the government has access to.

I think its fine for the government to allow certain plans to exist. But to mandate them for the purpose of making people drive less due to the inability to afford the higher insurance rates? No. I don't think it should matter how many miles people drive. I drove nearly 30,000 miles one year and didn't get in a single accident. Why? Because I'm a good driver and pay attention to whats going on around me. Sure that won't stop someone from smashing into me as I sit at a stoplight. But I don't think I should be punished for the actions of others. If I cause an accident, punish me. If I don't, leave me alone.


RE: This is new?
By aj28 on 11/10/2009 8:25:47 PM , Rating: 2
I think the point was that nothing has been mandated (yet), which makes all of the above bickering a little nonsensical and pointless. Neither the words "mandate" nor "require" exist anywhere in the article, and don't even appear until about twenty-or-so comments down... Let's all be friends when we can, yeah?

Opening up an opportunity for the free market to stretch its legs while simultaneously encouraging drivers to drive less thus helping preserve the environment and ease traffic congestion... It sounds pretty much like a win/win to me.


RE: This is new?
By Hoser McMoose on 11/11/2009 12:45:30 AM , Rating: 2
quote:
I know I sure as hell don't want a GPS tracking device on my car that the government has access to.

As a point of note GPS tracking is not necessary for this system. Progressive Insurance, as an example, merely takes mileage from your cars OBD-II port.

As far as the cost of insurance, as I'm sure you know it's ALL statistics and statistically speaking the more you drive the more likely you are to get into a collision. What's more, governments have put in place numerous other things that limit what statistics insurance companies can use. For example most states no longer allow insurance companies to use a drivers credit rating to determine insurance. It turns out that people who are financially responsible tend also to be more responsible drivers, but some felt that this discriminated against people with poor credit ratings. Other states have restricted setting insurance rates by a customers home address saying it discriminated against certain economic or even ethnic groups.

The end result? Insurance companies have to place more emphasis on what statistics they have left. You might not like it, but that's how the insurance industry operates.


RE: This is new?
By Hoser McMoose on 11/11/2009 12:24:53 AM , Rating: 2
quote:
Funny, my mileage already affects how much I pay per year.

Actually it probably doesn't, or at least not in a very meaningful fashion.

The insurance industry has, generally speaking, found that customers claims of mileage are HORRIBLY inaccurate (whether intentional or not) and therefore tend to just toss those numbers in the garbage. Try getting a quote sometime for 10,000 miles per year vs. 30,000 miles per year, with most companies the difference will be next to nothing.


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