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Pay-as-you-go car insurance to be introduced

December 2, 2010 12:00:00 AM PST
If you don't drive a lot of miles every year, you might qualify for extra savings on your automobile insurance. Earlier Thursday, California Insurance Commissioner Steve Poizner and two insurance companies announced a program that rewards drivers with a discount for driving fewer miles. The program doesn't begin until February 2011, but it looks like it will be a real benefit for those who work at home or are now unemployed, or anyone who drives fewer than 19,000 miles per year.

You've been able to pay as you go with cell-phone service and satellite TV for years.

But starting in February Californians will have pay-as-you-go automobile insurance.

Announced Thursday at a news conference with California Insurance Commissioner Steve Poizner, Southland motorists will soon be offered car insurance based on the number of miles they drive.

"Today I have approved a very innovative product, the first of its kind here in California, one of the first in the world, that will allow consumers to have some choices when it comes to purchasing auto insurance here in California," said Poizner.

In other words, if you drive more, then you pay more. Drive less and you pay less. The coverage will be offered by State Farm and the Automobile Club of Southern California.

State Farm will call its program Drive Safe & Save, which will offer an initial 5 percent discount to those who agree to self-report their odometer readings or have an active OnStar program.

"It's really a choice of the consumer. What we're really simply doing is offering the consumer a choice that if they choose to drive less, then they would enjoy greater savings by virtue of driving less miles in that car," said Tom Conley, agency vice president, State Farm Insurance.

Many consumers liked the idea of saving on their car insurance based on how much they drive.

"The concept is awesome because what about people who don't have to drive that much and they still have to pay the most amount - I don't think it's fair at all," said Jessica Green.

Rod Sturge said a similar program works well in his native Canada. "If you only drive 10 kilometers or miles to and from, instead of paying $200 a month you get away with $100 a month."

The Auto Club's program is called "Pay-Drive" for those who agree to self-report their mileage or who agree to attach a small monitoring device to their vehicle.

"This is a great opportunity to provide more accurate, lower rates for our members that choose to participate in the program," said Christopher Baggaley, senior vice president of insurance operations, Auto Club.

But besides saving money on your insurance premiums, Poizner says there are other incentives to the program.

"If by providing these financial incentives we can encourage people to drive fewer miles, then there'll be less traffic accidents, there'll be less air pollution, less gasoline consumption," said Poizner.

Depending on the amount of miles you drive, the savings estimated by the California Department of Insurance is anywhere from 1 to 10.5 percent. The Auto Club says its policyholders would average a savings of $68 per vehicle.


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