News: 2009 Press Release

Commissioner Poizner announced today that the final pay-as-you-drive regulations, which will enable insurers to offer consumers another auto insurance option, allowing rates to be based on actual miles driven as opposed to estimated miles driven, have been approved by the Office of Administrative Law and are now in effect. Commissioner Poizner originally proposed pay-as-you-drive regulations in September 2008.

"Pay as you drive is an innovative way to give California motorists financial rewards for driving less, leading to lower-cost auto insurance, less air pollution and a reduced dependence on foreign oil," said Commissioner Poizner. "After a year of hard work by my team at the Department of Insurance and months of working with consumer groups and other valuable parties to fine tune these regulations, these regulations are now in effect and I encourage insurance companies to start offering this pay-as-you-drive option to California consumers."

The pay-as-you-drive program will enable insurers to offer a new option for consumers who choose to take advantage of it. Companies can continue to offer traditional insurance based on estimated mileage. However, now that the regulations are in effect, insurers 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 consumers. The final regulations can be found by selecting this link.

The 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 have several options to verify the number of miles driven.  These include odometer readings taken by the insurer, the insurer's agent or vendor, auto repair dealers or smog check stations, self-reported odometer readings by the policyholder or a technological device placed in the consumer's vehicle. The final regulations explicitly prohibit insurers from using a technological device to gather vehicle location data for rating purposes. The regulations do not affect the ability to use existing devices such as GM's Onstar system to provide services such as emergency roadside assistance.

The final regulations are attached. The final regulations incorporate changes based on feedback from consumer groups, the insurance industry and other interested parties. The primary changes from the initially proposed regulations to the final regulations include:

• Explicit authorization for insurers to offer a price per mile, or prepaid mile option for drivers.
• The option for insurers to offer mileage verification policies instead of or in addition to mileage estimation policies.
• A requirement that any insurer offering a pay-as-you-drive plan must specify when filing with the department the exact types of mileage verification the insurer will accept.
• A requirement that any insurer offering a pay-as-you-drive plan must make all mileage verification methods available equally to all applicants and insured drivers with a mileage verification policy.
• The use of location data is still prohibited for most purposes. However, the final regulations clarify that insurers and motor clubs are not prohibited from offering optional devices to drivers to identify the location of the vehicle for purposes of providing emergency road service, theft service, map service or travel assistance service.

Last August, the Environmental Defense Fund estimated that if 30 percent of Californians participate in pay-as-you-drive 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.