The Right Price: California Considers Pay-by-Mile Auto Insurance

Jul 22, 2009
The California Department of Insurance has introduced a bill this week to begin offering pay-by-the-mile auto insurance policies to California drivers.  Under the new program, drivers would be able to select an insurance payment plan based on the number of miles they drive per month. A significant amount of money would be saved on insurance for, say, a vehicle that only makes occasional trips to a supplier a short distance away and spends most of its time sitting in a parking lot. For fleet owners, this system provides a way to keep themselves insured without overpaying for insurance on a vehicle they may very rarely use.

In addition to payment plans based on paying for a set number of miles per month, the proposed system also allows for mile-by-mile vehicle tracking at an even lower rate.  The miles traveled by a vehicle would be checked by odometer inspections at various locations that are convenient to the driver’s routine, such as their local mechanic or emission center.  Vehicle mileage could also be monitored by GPS devices, but don’t fear Big Brother just yet; GPS could be used to monitor a car’s mileage without relaying the vehicle’s location to the insurance company.  With some drivers already hesitant to adopt GPS tracking for other purposes, this privacy clause offers reassurance that they retain the trust of their employers.

The legislation to create this system will be voted on in the next several months, and could become law shortly in the state of California.  If California has any success with it, the same system could be on its way to other states across the country later this year.