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Pay-per-mile auto insurance could be the new HMO

Submitted by Debra Legg on Thursday, 5 November 2009 2 Comments
Why would someone who barely drives not jump at the chance to buy "pay per mile" auto insurance, which the Brookings Institute estimates will cut most people's yearly insurance costs $270 per car?

Well, for one, I remember the last time an insurance company swore I'd see dramatic savings under a revolutionary new plan. I hope someone came out ahead under health maintenance organizations - I suspect most of us did not.

For another, I'm already under a pretty simple low-milage plan: $680 a year - that's actually sane for California - and all I have to do is take my car in once a year for the agent to verify that I've driven less than 9,000 miles in the past 12 months.

I wouldn't complain if they gave me a bigger break for 4,500 miles, because with my habits and my husband's pending deployment, we'd save a bundle.

I suspect that's not the way it's going to play out in California, where state Insurance Commissioner Steve Poizner has released new regulations paving the way for pay-as-you go auto insurance.  Poizner, another one of California's great gubernatorial candidates, says such plans will encourage people to drive less and reward environmentally conscious driving habits, plus more accurately tie insurance costs to risks. Weren't HMOs supposed to do something like that, too?

I might be convinced to set aside my skepticism and give it a try with a company like MileMeter, which The Sacramento Bee said is interested in California. The Texas company lets you buy as little as 1,000 miles of insurance at a time, and it requires only that you send in three photographs of your odometer over six months as verification.

Ay, but not every company is as trusting.

Prudential, which offers pay-per-mile in 16 states, isn't happy with the odometer verification. That company installs devices that track your miles in real time, plus your speed and the time of day you were driving. They promise they won't release your data - honest, they won't. Unless someone makes them.

That type of reporting, though, is actually mild compared to that of firms that believe GPS is best, because it lets you save even more if you drive less-congested routes or during off-peak hours. I'm sure they won't release you data either. Unless someone makes them.

But back to MileMeter. I picked a Dallas address at random and used otherwise correct data on my car, age and gender. I also replicated my current coverage levels. The quote came back at $487 for 4,000 miles for six months - $276 more and 1,000 miles fewer miles allowed over a year. I do get a discount for carrying a renter's policy with my current company, but that only amounts to about $50 a year. I'd still be $226 in the hole.

If the little old lady who only drives her car two miles round trip to preschool Monday through Friday can't save under pay-per-mile, I'm wondering who can. Thanks for the money-saving "help," Commissioner Poizner. I'm not voting for you for governor, either.

I just hope my current company doesn't feel compelled to "adjust" its rates to reflect the pay-per-mile competition.

Copyright 2009 Debra Legg. All rights reserved.

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2 Comments »

  • Leslie K. said:

    I pray for the day when I can assert, “I only drive 10k a year!”.

    - 5 November 2009 at 5:31 am
  • Debra said:

    I was actually thinking of commuters like you when I wrote this, Leslie. If some companies actually set rates higher for people who drive as seldom as I do, what’s going to happen to costs for other folks?

    - 5 November 2009 at 6:24 am