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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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Taking advantage of those that NEED to drive
By Kakushya on 11/10/2009 12:49:57 PM , Rating: 2
Typically I feel frustrated at the decisions Politicians make in regards to policies surrounding the individuals they are supposed to serve (as representatives); and in this case I want to do everything I can to stop them.

I do not live in California, and I feel much pain for those that do. If something like this occurs, for people like me that have to drive 400+ miles in a week, it would be disastrous.

In my case, my mileage is based upon the need to spend time with my daughter (who does not live close to me). If this was outrageously expensive (as I believe it would be), then it would send a clear message to me that I SHOULD NOT spend time helping my daughter become a independent, productive member of society. One could ask, "Why not take the bus"; and the simple answer is that there is no bus service that goes where I need to go; and also bus service takes sooooo long to get you where you need to be that it's the same as spending no time with her at all.

All too often Politicians are so far removed from reality and what people experience in their life, that they have no clue about the consequences of their policy decision making. We (the people) need to take the power back away from Politicians by all means peaceable (if possible) and restore our government to the idea that we are a society of individuals (not automatons).




RE: Taking advantage of those that NEED to drive
By japlha on 11/10/2009 2:21:57 PM , Rating: 2
I understand your situation as I have to take a 4 hour flight to see my son. Perhaps I should pay less on airfare because I "need" to see my son compared to someone taking the same flight for frivolous reasons?

We all have a "need" to drive. I "need" to drive to the grocery store to buy food. The pizza delivery guy "needs" to deliver pizzas so he can support himself or family. Do we discount premiums when we drive for a "need". Do I get charged more per mile when I drive to a movie theatre? Is entertainment a need? How do we even define a need?

The reality is the more you drive the higher the risk of being in an accident regardless of the reason for driving.

This is just another factor in an insurer's calculations to predict risk.

My guess is premiums will not change for lower mileage drivers. Instead the premiums will increase for higher mileage drivers.


By 91TTZ on 11/10/2009 3:49:10 PM , Rating: 2
Who will get to decide who is a "low mileage driver" vs. a "high mileage driver"?

If you leave it up to the car insurance companies, they'll probably decide that the vast majority of the public are high mileage drivers since that will earn them more money.


By IcePickFreak on 11/10/2009 7:48:49 PM , Rating: 2
Just a hunch here, but I think he people who have been in a lot of accidents are the ones who are more likely to be in another. If you drive 30,000miles a year and haven't had an accident in 10 years why should you pay a high premium? On the flip side someone who only drives 6,000 miles a year, mostly because their car is in for repairs for 5 months out of the year because of 5-6 accidents a year, gets a deal? What's the differential, the guy with the accident maybe pays as much as the person who drives 5 times as much yet has no accidents?

How about we apply this to local taxes. I have no kids, I should get a tax break since I have none at school. I mean if I have no kids I'm not likely spending and of that tax money (ie. making a claim) used in schools am I? I should have to pay less of a 'premium' (ie. taxes). Currently it's the exact opposite.

I don't even know where you were trying to go with the "need" argument. People live in tree huts (in a jungle no less) and wear almost no clothing and apparently have all they need, should we tear down all the buildings and move back to that? Might not be bad since everyone has to pitch in their fair share, unlike the 'civilized' western world.


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