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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 FITCamaro on 11/10/2009 5:23:17 PM , Rating: 2
What conservatives generally are against is the government mandating things. I know I sure as hell don't want a GPS tracking device on my car that the government has access to.

I think its fine for the government to allow certain plans to exist. But to mandate them for the purpose of making people drive less due to the inability to afford the higher insurance rates? No. I don't think it should matter how many miles people drive. I drove nearly 30,000 miles one year and didn't get in a single accident. Why? Because I'm a good driver and pay attention to whats going on around me. Sure that won't stop someone from smashing into me as I sit at a stoplight. But I don't think I should be punished for the actions of others. If I cause an accident, punish me. If I don't, leave me alone.

RE: This is new?
By aj28 on 11/10/2009 8:25:47 PM , Rating: 2
I think the point was that nothing has been mandated (yet), which makes all of the above bickering a little nonsensical and pointless. Neither the words "mandate" nor "require" exist anywhere in the article, and don't even appear until about twenty-or-so comments down... Let's all be friends when we can, yeah?

Opening up an opportunity for the free market to stretch its legs while simultaneously encouraging drivers to drive less thus helping preserve the environment and ease traffic congestion... It sounds pretty much like a win/win to me.

RE: This is new?
By Hoser McMoose on 11/11/2009 12:45:30 AM , Rating: 2
I know I sure as hell don't want a GPS tracking device on my car that the government has access to.

As a point of note GPS tracking is not necessary for this system. Progressive Insurance, as an example, merely takes mileage from your cars OBD-II port.

As far as the cost of insurance, as I'm sure you know it's ALL statistics and statistically speaking the more you drive the more likely you are to get into a collision. What's more, governments have put in place numerous other things that limit what statistics insurance companies can use. For example most states no longer allow insurance companies to use a drivers credit rating to determine insurance. It turns out that people who are financially responsible tend also to be more responsible drivers, but some felt that this discriminated against people with poor credit ratings. Other states have restricted setting insurance rates by a customers home address saying it discriminated against certain economic or even ethnic groups.

The end result? Insurance companies have to place more emphasis on what statistics they have left. You might not like it, but that's how the insurance industry operates.

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