California Gets Access to Fourth Pay-As-You-Drive Program

California regulators have approved a new pay-as-you-drive (PAYD) program they say will be good for both the environment and policyholders’ pocketbooks.

OdometerThe program from Civil Service Employees Insurance Company (CSE) will allow policyholders to qualify for discounts by driving fewer miles than estimated, as do PAYD programs already offered by several other insurers in the Golden State, including AAA and State Farm.

Unlike other programs, however, CSE will reward customers for low mileage based on the exact number of miles they drive between 5,000 and 12,000 miles, rather than using wider mileage tiers to calculate premiums. The State Farm PAYD program, for instance, uses 500-mile tiers up to the 19,000-mile mark.

“It encourages you to drive less,” CSE spokesman Matthew Hull said Thursday in a phone interview.

Under PAYD programs, coverage providers verify policyholders’ annual mileage instead of relying on estimates from those customers. Insurers reward motorists who log substantially fewer miles each year.

California has long required insurers to factor in yearly miles driven when determining how much to charge for coverage. But until late last year, companies had to depend on policyholders’ rough guesses of how far they would drive. Insurers awarded discounts based on mileage ranges of, for example, 0-7,500 miles and 7,500-plus miles.

State regulations approved in 2009 paved the way for insurers to offer voluntary programs that include the ability to ask for mileage verification and to institute smaller mileage tiers.

The CSE program is scheduled to begin in January and will be offered exclusively to the company’s California auto insurance customers by CSE Safeguard. It offers policyholders two options for mileage verification.

They can either track miles by installing a telematics device—which is free to anyone who signs up and plugs into a vehicle’s universal port—or they can report their mileage for each vehicle via the company’s website.

The company may use an agent or odometer information from a smog check to verify reported mileage, Hull said.

CSE customers will estimate their miles for the year before each annual policy period and then CSE retrospectively rates them based on how many fewer miles than estimated they drove.

“So if you’re driving less miles than you estimated, we’re basically going to send you a check for that (unused) mileage,” said Hull, who added that customers could see $50 to $100 back at renewal time.

The voluntary program will be available for annual policy terms, with minimum mileage of 5,000 miles. Customers will also get a discount for signing up that will likely be about 2 percent to 5 percent, according to Hull.

If CSE customers exceed their mileage estimates “then we’re basically going to tell you how much you owe us,” Hull said.

Those who log more miles than expected would likely be placed in another program that does not verify mileage, according to Hull. But he said the program should appeal mainly to environmentally conscious people and others who don’t typically drive much daily, so that is not expected to be a major issue.

California Insurance Commissioner Dave Jones said the CSE program will benefit both the environment and policyholders.

“This environmentally conscious program unites economic savings with emissions reduction in an effort to reduce traffic congestion and greenhouse gases,” Jones said in a statement issued earlier this week. “I encourage more insurance companies to start offering pay-drive options to their policyholders.”

About Gregor McGavin
Gregor McGavin is an award-winning journalist who has reported across the country for such publications as The Associated Press, the Arizona Republic, the Pittsburgh Tribune-Review and the Press-Enterprise.

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