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Pay as you drive insurance
Article Launched: 09/07/2008 07:35:31 PM PDT

When it comes to traffic reduction, California needs all the help it can get. And sometimes the only thing to finally get people out of their cars is to offer them cold, hard cash.

The proposal for a voluntary pay-as-you-drive insurance program for California drivers, being pushed by Insurance Commissioner Steve Poizner, might be one of the carrots that actually works. The draft proposal would let drivers have the option of buying auto insurance plans that are based on the number of miles they drive.

Note: Poizner is a well respected personality in the inurance industry.

His plan has received rave reviews from economists and environmentalists alike for providing a solution to our state's most pressing problems: clogged roads, air pollution, high fuel prices. But it is Poizner's emphasis on reporting mileage while maintaining driver privacy that is especially appealing to consumers.

The PAYD model would allow drivers to document their annual mileage in three ways: They could submit maintenance records; they could have an insurance company representative check their car's odometer; or they could have an electronic mileage-tracking device installed on their vehicle.

The latter option has been a source of debate among groups such as Consumer Watchdog. Former mileage-tracking technologies relied on a GPS device, which ignited privacy concerns. The idea of giving auto insurance companies access to drivers' location data was a bit too "Big Brother" for consumers.

That said, Poizner has said he will not
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approve such devices.

Instead, electronic monitoring would simply track total miles driven, not a driver's destination or time of location. These improved trackers are currently used by insurance companies in other states and countries.

Poizner's plan seems like the ultimate solution for a combination of California's economic and environmental woes.

And there's research to back it up. In July, the Brookings Institution released a study on PAYD and its predicted impact on Californians. The study found that up to 64percent of California households would have lower premiums under PAYD, with an average savings of $276 annually per vehicle.

Savings are expected to be greater for lower-income households.

Furthermore, GMAC Insurance Group, which runs a PAYD program through General Motor Corp.'s OnStar system, has reduced customer premiums in other states by 13percent to 54percent.

PAYD supporters argue that a savings-incentive system would encourage motorists to drive less - and thus relieve traffic congestion.

The overarching future effects of PAYD on California are dramatic. Californians would save billions of dollars on gasoline, thereby decreasing the current energy crisis and contributing to the fight against global warming.

The Brookings Institute study also found that PAYD could reduce greenhouse gas emissions by 2percent.

While that's reason enough, the individual savings could be substantial as well. The Environmental Defense Fund predicts Californians could save about $40billion in car-related costs from 2009 to 2020 - and that's if just 8.5million drivers sign up for the new per-mile model.

Pay as you drive might not be the answer to all the state's traffic ills. But it is one good policy that, if followed by many more, can have a lasting and positive impact on California's prolonged environmental stresses and economic woes.


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