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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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
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
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.

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