California drivers get a break with new “pay as you go” insurance plans

California drivers get a break with new “pay as you go” insurance plans

Two companies have been approved by Insurance Commission, Steve Poizner, to offer low mileage insurance for California residents beginning in Feburary 2011.

State Farm and Auto Club of So. California is expected to roll out discounted rates and incentives for people who drive less – other insurers are expected to follow.

State Farm’s plan is to collect odometer readings at the time of signing up or if the client has an OnStar system with GMAC, they can submit electronically. Afterwards checks would be done by the company or other outside licensed entities on a regular basis. Auto Club’s system would be similar but would also offer the voluntary installation of an automatic mileage data transmission device in addition.

Ultra low mileage for an example, under 2,000 miles a year, is predicted to save drivers up to 45% a year through State Farm. While Auto Club’s discount could be more like 1% to 10.5%, on average with their verified mileage program savings could be more like $68 per vehicle, per year.

The “pay as you go” program is especially loved by environmentalist groups who have been pushing for this for many years now. Their hope is to incentivize drivers to carpool, take the train and/or avoid needless trips that could sometimes be done via bike or walking.

Consumer advocates are showing more acceptance towards the State Farm program due to the rate dropping every 500 miles – citing it gives people a better shot at lowering their premium. Overall, everyone seems pretty happy about the new plan – keep an eye out for more companies to jump in to keep their competitive stance. The State Farm program will be available for new and renewal customers on 2/28/11 and Auto Club policy holders can opt in starting 2/1/11.

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