Third Pay-As-You-Drive Payment Program to Launch in California

California regulator Dave Jones announced last week that a third coverage provider in the state, Sequoia Insurance, has filed to offer residents pay-as-you-drive (PAYD) coverage plans.

Insurers offering PAYD verify a policyholder’s mileage rather than rely solely on rough estimates given by the motorist him or herself, and insurers in turn give bigger discounts to drivers who put in substantially fewer miles behind the wheel each year.

Insurance companies in California have, since the 1980s, been required to take the annual miles that a policyholder drives into account when determining how much to charge for coverage. But up until recently, insurers had to rely on rough, unverified projections provided by drivers themselves. As a result, auto insurers had broad mileage categories. State Farm, for instance, had only two: 0-7,500 and 7,500-plus.

But PAYD regulations approved by then-commissioner Steve Poizner paved the way for insurers to offer voluntary PAYD programs that include the ability to ask for mileage verification and to institute smaller mileage tiers.

Top auto insurance companies AAA and State Farm also announced in recent months that they would be offering drivers policies with greater weight placed on a policyholder’s mileage, and Sequoia filed for its own PAYD program last week.

Sequoia has a much smaller market share in the state compared to AAA and State Farm, though. The company’s total share of the personal auto liability market was less than 1 percent in 2009.

To read more about the specifics of the Auto Club of Southern California’s and State Farm’s PAYD programs, check out the following stories:

About Matthew Morisset
Matthew Morisset is a proud alumnus of the University of Redlands, where he obtained a degree in English Literature. Utilizing his passion for analysis and writing, Matthew looks for important trends in the auto insurance industry and their implications for consumers and the market as a whole.

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