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: California is stupid
By mdogs444 on 11/10/2009 11:26:02 AM , Rating: 2
California environmentalists have been pushing for for some time. It gets people to drive less. Well, no, that's not entirely accurate. The environmentalists wanted to tax drivers per mile. Just be thankful this insurance method doesn't punish you for driving period.

If the environmentalists are pushing for it - then chances are it will cost you more - and provide yet another burden on your daily life all to please the enviro-whackos who want to go back to barney rubble days.

RE: California is stupid
By Mint on 11/10/2009 12:39:00 PM , Rating: 2
I'm usually railing against retard environmentalists, but this time conservatives should be joining the call.

Pay As You Drive insurance more accurately distributes the cost of driving among the people who drive. The only reason costs will rise is that insurance companies will stop being able to milk low-risk drivers to subsidize the higher-risk ones. Instead of me paying 2.5x the insurance per mile, I'll only pay 1.5x or whatever the statistics justify for low mileage drivers.

The same thing happened with cell phones. Limited competition and difficulty of portability made companies structure plans to encourage people to buy higher-minute plans for no reason. However, competition finally gave us reasonable prepaid plans, so I pay <$10/mo instead of $30+/mo for the minimum plan. Now low volume callers don't have to subsidize high volume callers.

RE: California is stupid
By JediJeb on 11/10/2009 3:24:18 PM , Rating: 2
The only reason costs will rise is that insurance companies will stop being able to milk low-risk drivers to subsidize the higher-risk ones. Instead of me paying 2.5x the insurance per mile, I'll only pay 1.5x or whatever the statistics justify for low mileage drivers.

But why are people who drive more necessarily higher risk? Yes more miles driven means more time on the road in which you can have an accicent, but it also means that person has more driving experience. Over the road truck drivers can drive over 100k miles per year, yet as a whole they have fewer accidents probably than drivers that only travel short distances to work and back. Also where you drive makes more of an impact on your likelyhood of having an accident than how far you drive. Driving 15 miles to work on a congested multilane freeway would be more apt to cause accidents versus 50 miles on open two lane roads in the middle of nowhere. I think there are several flaws in just basing cost on a per mile basis.

RE: California is stupid
By Mint on 11/10/2009 4:15:46 PM , Rating: 2
Nothing is "necessarily" so in insurance. On average, though, people with higher mileage have more claims and casualties. It's not perfectly linear as low mileage drivers do have a higher per-mile claims rate, but the relationship is significantly stronger than the current "low mileage discount" reflects.

Here's some stats I linked to in another post (starting on page 8):

RE: California is stupid
By Kenenniah on 11/11/2009 2:04:00 PM , Rating: 2
I don't think anyone is suggesting they use miles driven only. Your driving history, the area you drive in, and the type of expected use of the vehicle are still considered in your rates.

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