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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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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.


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