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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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Hogwash!!!...
By MrBlastman on 11/10/2009 11:09:00 AM , Rating: 2
quote:
drivers that drive more miles and have a higher chance of accidents pay the same amount as drivers who drive significantly less.


It took this lady:

http://www.foxnews.com/story/0,2933,572853,00.html

950 tries to pass her driver's license test!

Would YOU want to live anywhere near her? She had to score a 60 out of 100 to pass. She might drive only on occasion, but still, should SHE be paying less than someone who is a very diligent, cautious, attentive driver who drives hours a day?

While it sounds neat to justify charging drivers who drive more higher rates (and USAA already does do that but it isn't a huge difference), I do not think you can safely say that it is a completely fair measure of projecting rates.

In one study, 52% of accidents were within 5 miles of home, 69% were within 10 miles of home:

http://www.carinsurance.com/Articles/content31.asp...

I could quote statistics all day, but the fact is a bad driver is a bad driver, regardless of how many miles they drive. Some people are just dangerous in a car and do not belong on the road ever, but, being a free country they get to drive as long as they do not get in wrecks. Penalizing those who drive long distances I don't think is completely fair. It is like a zero-tolerance policy (and we know those don't work too well).

I think some form of balances and measures needs to be put in rather than just equating premiums to distance traveled.




RE: Hogwash!!!...
By therealnickdanger on 11/10/2009 11:31:15 AM , Rating: 2
The simple truth is that crashes typically increase alongside accesses. The more driveways, alleys, and intersections you have along a stretch of road, you increase the chance for a crash that much more. Combined with the fact that areas with more accesses have greater populations, you also get more drivers, bicyclists, and pedestrians thrown into the mix.

The reason that most people don't crash more than 20 miles from their home (17% according to that link) is that very few people live further than that from a population center. We can toss statistics around all day, but I am sitting on approximately 30 years of Minnesota crash data that says that long-distance roadways (like Interstate highways) inherently have the lowest crash rates of any roadway system. The highest crash rates? Pick any street in downtown Minneapolis or St. Paul.

So if we had a law in Minnesota that taxed people per mile, claiming that the further they drive per day, the more "responsible" they are for crashes and the impending crash cost, we would in fact be punishing many drivers (commercial drivers specifically) that traverse many miles per day along this state's safest roadways? Leave it to the government to come up with something so bass-ackwards.


RE: Hogwash!!!...
By Mint on 11/10/2009 1:56:39 PM , Rating: 2
Look here:
http://www.vtpi.org/paydsum.pdf
http://www.ceres.org/Document.Doc?id=432 (especially pages 8-13)

Some quotes:

Higher-annual-mileage motorists tend to have lower per-mile crash rates, and lower annual-mileage motorists tend to have higher per-mile crash rates, but these factors can be reflected in premium structures.
Within a particular rating category there is a strong positive relationship between annual mileage and annual insurance claims.


Mileage is one of several factors that affect crash rates. Mileage cannot be used instead of other rating factors by charging all motorists the same per-mile fee or
funding insurance through fuel taxes, but accuracy improves significantly if annual mileage, incorporating additional rating factors, becomes the basis for premiums.


It's not linear, but the relationship is certainly a lot stronger than is reflected by insurance pricing. Imagine yearly premiums like $300 + $0.12 per mile instead of $1200 for the low mileage driver, $1500 for the average one, and $1800 for the high mileage. Then you will actually see the cost per mile that you are putting on the system.

Moreover, even though downtown Minnesota will have more crashes per mile than rural areas, it will also have fewer serious injuries or fatalities per mile. How all these factors are weighted is up to the insurance companies and their actuaries.


RE: Hogwash!!!...
By therealnickdanger on 11/10/2009 3:03:24 PM , Rating: 2
quote:
How all these factors are weighted is up to the insurance companies and their actuaries.

True. Which is why they can't be inherently trusted to do the right thing. I guarantee that they will definitely do the financially profitable thing.

quote:
Moreover, even though downtown Minnesota will have more crashes per mile than rural areas, it will also have fewer serious injuries or fatalities per mile.

False.

Urban Minnesota has many more serious injury and fatal crashes per mile than rural Minnesota. Even after you calculate in vehicle miles traveled (VMT), the overall crash rates and injury-specific severity rates are still higher in the urban centers.


RE: Hogwash!!!...
By Mint on 11/10/2009 4:29:45 PM , Rating: 2
They don't need to be trusted to do the right thing. They just need to offer PAYD insurance. If it's cheaper (as it is likely to be), then I along with others will switch over. Offering lower rates to low-risk drivers that are with other insurance companies does indeed bring them more profits, so this time the profitable thing is the right thing.

As for urban vs. rural, I just assumed that it was similar to the trends of the rest of nation, e.g. page 8 here:
http://www.ceres.org/Document.Doc?id=432
Maybe MN is a special case, but the negative y-intercept of that trendline tells you that urban areas have lower per-mile casualty rate than rural areas across the nation.

OTOH, I do know that Toronto has higher insurance rates than the rest of Ontario simply because there are more lawyers around to game the system :(


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