California legislators have advanced their step to push the “Pay as You Drive” (PAYD) policy. This policy is popularly known today for determining the motorists’ auto insurance rate based on the number of miles they drive. This usage based auto insurance was originally proposed few months ago to help drivers save on their auto insurance costs.
Initiating PAYD in California
PAYD is no longer a new concept in the industry of auto insurance. These days, there are already several countries that have implemented this policy; among them are Japan, South Africa, United Kingdom, Australia, and Canada. Meanwhile, 30 states in United States are presently allowing carriers to propose the plan to consumers as a better option to save money.
California Department of Insurance also announced last July that it will mandate a complete adoption of the said policy. Based on its current progress, there is a great possibility that the state regulator’s plan will be fully realized in 2010.
Two weeks ago, Commissioner Steve Poizner also released a system that will allow and authorize carriers to validate the mileage for PAYD. This system does not have any dictation as to how the plan should be followed.
Prospective Benefits of PAYD
Part of the purpose why regulators are pushing the use of per-mile pricing is to encourage Californians to minimize their driving, which will lessen air pollution including its other effects on the environment. Likewise, regulators said that the policy will also help to decongest city traffic.
For now, insurers in California are said to adopt the examples set by carriers from other states. Those carriers started proposing PAYD to their policy-holders with six-month policies and with sections of covered miles that range from 100,000 to 60,000 miles. Also, those carriers stated that they are planning to make the proposal available as soon as the regulation is enacted. A number of providers in the state expressed their strong approval over the plan by pronouncing that half of policy-holders are really underserved and overcharged.
Meanwhile, some drivers expressed their opposition to mandate the policy because they do not want their driving habits to be scouted. This notion was formed when supporters of the proposition mentioned previously that the policy will change the habits of several motorists, particularly those who commonly take leisure driving.
Nonetheless, several motorists have also shown their approval, especially those who have two or more vehicles. According to them, PAYD presents them an opportunity to lessen their costs for vehicles that they rarely use. The state commissioner also affirmed that obtaining discounts while economizing gas is a great option to cope with the struggling economy in California.
Writer: Ruth P