The Department of Insurance announced earlier this week that the final regulations allowing insurers to offer pay as you drive auto insurance programs have been approved.
What this means to consumers is that in the hopefully not to distant future, you will pay for auto insurance based on how many miles you drive. The less you drive, the less you pay for auto insurance. With more people working closer to where they live or if they telecommute to work via website or modem, this could mean a big savings.
Right now the program seems to only be intended for "good drivers" which meet the California Good Driver provisions. The provisions are:
1. Has been licensed continuously for 3 years.
2. No more than 1 DMV point in the last 3 years.
3. No drug or alcohol related felony convictions in the last 7 years.
4. No at fault accidents involving death or bodily injury in the last 3 years or that resulted in more than $500 in property damage.
Mileage verification can be done one of two ways. First, the estimated mileage is provided by the insured with a current odometer reading and that is used as a base for the first year. When the policy renews a new odometer reading would be done by either the insured, a third party hired by the insurance carrier or your insurance agent. Your policy would then be adjusted based on this reading.
The second method uses verified actual mileage. You allow the insurance carrier to install a device in your vehicle which periodically reports your mileage to the carrier and your policy is adjusted according to these readings.
The insurer can also use odometer readings form smog certifications,DMV or any other government agency that records odometer readings.
A few companies have these programs in place in other states, however they would have to adjust them to comply with California's regulations. It will be interesting to see who the first carrier is to offer this program and what kind of savings it will yield to the consumer. Only time will tell.