The PAYD Insurance program will allow insurers to offer plans based on a verified and more accurate mileage, so that people who choose to drive less will pay less for auto insurance.
“We implemented a verified mileage program because we expect that it will provide more accurate, lower rates to policyholders who choose to participate in the program,” said Christopher Baggaley, senior vice president of insurance operations for Auto Club.
“Drive Safe & Save” will help us better match price to risk and that’s a good thing,” said Tom Conley, State Farm Agency vice president. “We believe customers will respond positively to this program.”
Beginning on Feb. 28, 2011, State Farm customers will have an option to move into the new verified mileage plan, which State Farm has labeled its Drive Safe and Save program. Under the plan, State Farm will offer an initial 5 percent discount for the first policy term to insured drivers who agree to self-report their odometer readings at the beginning and end of each policy period or who agree to allow State Farm to access their mileage data automatically when the insured’s vehicle has an active On Star system.
The mileage amounts used in determining the applicable rates for each subsequent policy term will be based upon the actual verified mileage from the previous term. Those insureds who choose these more accurate mileage reporting methods and drive less than 19,000 miles will have lower premiums than those insureds who simply estimate their miles for the policy term based upon current loss projections. In addition, State Farm has created 39 new and narrower 500 mile pricing intervals for its Drive Safe and Save program, which will allow those who drive fewer miles to achieve even greater savings. Excepts for the highest segments, customers will save every time they drop down a segment. Ultra-low mileage drivers could save up to 45 percent, the company said.
State Farm presently has 3.3 million auto policies in force with written premiums of $2.5 billion in California for 2009. They estimate 25 percent of their policyholders may select the optional Drive Safe and Save program which would result in a saving to policyholders of $31 million.
Drivers who choose to purchase this policy will then be rated based upon the actual annual miles they have driven. Under the program, consumers who reduce their driving habits by as little as 500 miles per year will see a reduction in their rates.
Beginning on Feb. 1, 2011, The Automobile Club of Southern California’s Pay-Drive program will be made available to insured drivers who agree to report their odometer readings at the beginning and end of each policy period or who agree to plug in a small “telematics” device into their automobile which will automatically record the number of miles driven. The rates for those who verify their actual miles driven via these methods will now be, depending on the number of miles driven, from 1 percent to 10.5 percent lower than those insureds in the same “mileage band” who simply estimate their miles for the policy term.
Existing policyholders who choose to be part of the Auto Club’s verified mileage program will pay an average of $68 per vehicle less than those who choose not to be part of the program.