Second California Insurer Files to Offer Pay-As-You-Drive Coverage

July 19, 2010

The Automobile Club of Southern California has submitted an application to the state Department of Insurance to offer an insurance program that rewards California drivers who voluntarily drive fewer miles with lower auto insurance rates.

The voluntary pay-as-you-drive initiative allows insurers to offer plans based on more accurate mileage, so that people who choose to drive less will pay less for auto insurance. The new approach to rating was made possible by regulations introduced by Insurance Commissioner Steve Poizner that took effect in October 2009.

The Auto Club of Southern California is the second insurer to submit a PAYD rating plan, following State Farm Mutual Automobile Insurance. Assuming that the Auto Club of Southern California obtains approval from the Department, its customers will have an option to remain under the current estimated mileage program, in which mileage is estimated by the policyholder and self-reported to the insurer. Or, they may move into one of two new “odometer verified” or “telematics verified” mileage plans.

Customers who opt into the odometer verified plan will report their exact mileage to the insurer, as indicated by the odometer. Mileage will be less expensive under the “odometer verified” plan than under the current estimated mileage plan. Customers who opt to participate in the telematics verified plan will have their mileage verified through a technological device. Mileage will be less expensive under the “telematics verified” plan than under the “odometer verified” plan.

Details on the type of device used in the “telematics verified” plan are not yet available, although CDI regulations prohibit insurers from using a technological device to gather vehicle location data for rating purposes.

The filing is now under review by the Department of Insurance. This new plan proposed by Auto Club of Southern California must be approved by Commissioner Poizner before being placed on the market for consumers to purchase.

State Farm Mutual Automobile Insurance submitted its PAYD application to the DOI in May 2010, and the filing is still under review.

Was this article valuable?

Here are more articles you may enjoy.

From This Issue

Insurance Journal West July 19, 2010
July 19, 2010
Insurance Journal West Magazine

Excess, Surplus & Specialty Markets Directory, Vol. II