California’s Department of Insurance as well as state legislators are considering bringing “pay-as-you-drive” automobile insurance to the state, a system in which automobile insurance premiums would more accurately reflect how far motorists drive each year.
Assembly Bill 2800, sponsored by Jared Huffman, D-San Raphael, would allow insurers to apply different rating factors for voluntary insurance-verified annual mileage and applicant-estimated annual mileage.
Insurers generally support the bill. According to the Personal Insurance Federation of California, which represents insurers who write approximately 50 percent of the auto insurance sold in the state, the bill “addresses the dual goals of emission reductions through incentives and ensuring fairness in automobile rates as required under current law … AB 2800 would ensure true mileage verification and allow low-mileage, low-polluting drivers to pay less for auto insurance,” the association said.
Consumer advocacy groups, however are concerned that the bill would lead to unfairly discriminatory rating. Consumer Watchdog said the bill, if approved, would allow insurance companies “to install spyware in Californians’ cars, and charge higher auto insurance premiums to those who refuse.” The group said proposals to verify mileage would “invade consumers’ privacy.”
Meanwhile, the Department of Insurance is pursuing its own form of PAYD regulations, which it said would make AB 2800 unnecessary. Following a public hearing on the issue held on June 23, 2008, the DOI indicated it was working to propose regulations in the next six to eight weeks, or by mid-August 2008.
“A major motivation behind the Commissioner’s push to make [PAYD a type of coverage] available [to consumers] is to encourage Californians to drive less, reducing the environmental strain of carbon emissions that result from driving,” stated Molly DeFrank, deputy press secretary for the Office of Insurance Commissioner. The Department did not specify how mileage would be verified.
For more information, see a related article in Insurance Journal West region’s July 7, 2008, issue.
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