California Moves Closer to Insurance by the Mile for Drivers
November 10, 2009 10:57 AM
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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.
This article is over a month old, voting and posting comments is disabled
Here is a novel idea...
11/10/2009 4:31:29 PM
How about taxing the driver based on his or her driving history?? People who are bad drivers would get charged more, people who are good drivers get charged less. This sounds strangely like the system we use now...
I drive a lot every day, but have never gotten a speeding ticket or been in a collision (knock on wood). Assuming I continue this, why should I be charged more because I drive more? I cost the insurance company less than the joker next door who drives once a month but crashes every time.
On another note, it's already ridiculous that the insurance company charges PER VEHICLE and not PER DRIVER - I have 3 old cars and am charged an additional fee for each one.
RE: Here is a novel idea...
11/10/2009 8:49:18 PM
Pfft... That would make sense.
Fact of the matter is, they need good drivers to keep paying them money and receiving nothing. At the same time, they need the bad drivers to stay customers and (hopefully) pay off their debt one of these days.
The logic they use is the classic "Is it cheaper now?" scenario. Rather than replace your computer with an upgraded model for $300, a warranty company would rather repair it for $250 and hope that it doesn't break again. Even if it does break again and costs them another $250, it's still cheaper to fix it than giving you the $300 computer. This is the way all large insurance-type companies work their logic.
"Nowadays you can buy a CPU cheaper than the CPU fan." -- Unnamed AMD executive
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