News: 2009 Press Release

Insurance Commissioner Poizner today announced revised regulations that will allow companies to sell automobile insurance by the mile in California, potentially saving many consumers money by only paying for the miles they drive.

"These regulations expand insurance options for consumers, allowing a freer market to create incentives for driving less," said Commissioner Poizner. "By empowering consumers to take charge of their insurance bill, we may see fewer cars on the road; which means cleaner air, safer streets and lower premiums."

Commissioner Poizner's proposed regulations will enable insurers to offer a new option for consumers who prefer pay-as-you-drive insurance. The proposed regulations allow automobile insurance companies to offer additional products for consumers to choose from. Companies can continue to offer traditional insurance based on estimated mileage. However, now they can also offer a verified mileage program instead of or in addition to a traditional estimated mileage program.

Commissioner Poizner originally proposed the "pay as you drive" regulations last summer to make a new, more mileage-accurate auto insurance option available for California consumers. Pay-as-you-drive insurance is a way for motorists more accurately to pay for the coverage they need, by linking their premium more closely to the number of miles they actually drive. Poizner announced today that he has amended these regulations to include an additional option for consumers to pre-pay for a specific number of miles.

Under the prepaid, or "price per mile" option, consumers would have a new option to purchase a block of miles at a specified price for a set time period. If a consumer runs out of miles before the end of the policy period the consumer can purchase more miles.

The revised regulations also allow insurers to offer discounts to drivers who opt to purchase a mileage verification policy. Any auto insurance program, including a pay-as-you-drive program, must be approved by Commissioner Poizner before being placed on the market for consumers to purchase.

If a driver elects to purchase a pay-as-you-drive policy, the insurer would verify the driver's miles through a variety of methods, including odometer readings taken by the insurer or its agents or vendors, auto repair dealers, smog check stations, self-reporting by the policyholder or a technological device placed in the consumer's vehicle. The amended regulations explicitly prohibit insurers from gathering location data from consumers through the technological device.

As a former Silicon Valley entrepreneur who founded SnapTrak, a company that pioneered technology to put GPS receivers into cell phones, Poizner understands firsthand that GPS can be a life-saving tool when used appropriately. However, Poizner has also said this type of technology does not have a place in pay-as-you-drive auto insurance for privacy and public policy reasons. 

"California has always been at the forefront of technological innovation. A major priority for the Department of Insurance is harnessing this technology to benefit consumers," continued Commissioner Poizner. "At the same time, it is vital that the privacy of drivers remains intact. In these amended regulations, I have expressly prohibited insurance companies from using GPS devices to obtain location data from consumers."  

In addition to the clear benefits of increasing options for consumers, especially options that allow consumers to save money by only paying for the insurance they use, pay-as-you-drive coverage has been touted by environmental groups as a way to help the environment. Last August, the Environmental Defense Fund estimated that if 30% of Californians participate in this voluntary coverage, California could avoid 55 million tons of CO2 emissions between 2009 and 2020, which is the equivalent of taking 10 million cars off the road. This would save 5.5 billion gallons of gasoline and save Californians $40 billion dollars in car-related expenses. Additionally, the California Air Resources Board has recommended the adoption of pay-as-you-drive as one of the means to meet future climate change gas reduction targets.

California law has procedures in place to allow for public involvement in adopting new regulations, including public comment on the revised regulation. After these procedures are completed, the regulations will take effect as soon as possible. Insurers will then be able to apply to offer pay-as-you-drive insurance in California. The regulations are anticipated to take effect in fall 2009. 

A copy of the amended regulations is available at www.insurance.ca.gov.