auto insurance
Insurance Commissioner Steve Poizner’s decision to allow pay-by-the-mile auto insurance policies to be offered in California is good news on several fronts.
Consumers should like the new rule, which was fine-tuned for more than a year by insurance officials, because it will give them a new option and create competition. MileMeter, which offers policies in Texas in which motorists can buy from 1,000 to 6,000 insured miles, plans to come to California, and other firms are certain to as well.
Environmentalists and commuters alike should like the decision because it will create a new incentive to drive less, cutting pollution and congestion.
People who believe in fairness should welcome this approach as well. There is no reason why insurance should cost more for those whose use patterns are less risky.
But here is where the issue gets a little murky. When it comes to auto insurance, fairness can be defined in different ways. Poizner’s predecessor as insurance commissioner, John Garamendi, pushed successfully to minimize the use of ZIP codes in calculating auto insurance rates. He argued that it was unfair to punish people who live in areas with a greater prevalence of auto thefts and burglaries.
But insurers said with unassailable logic that the cost of an insurance policy should be based on the risk. A strong argument can be made that it was unfair for the state to change risk-evaluation formulas in a way that made vehicle owners who live in safer areas have to indirectly subsidize the cost of insurance for owners living in less safe areas.
An argument can be made as well that Garamendi was playing politics, since his fellow Democrats are concentrated in urban areas where there are typically more auto thefts and burglaries to drive up insurance bills under the old formula.
We wonder if at some point politics won’t factor into pay-by-the-mile as well. A Brookings Institution study suggests pay-per-mile would reduce premiums for 64 percent of California households. Those whose rates go up because they have to drive a great deal because of their jobs or the length of their commute to work or school are likely to feel aggrieved — and some politician will be willing to grandstand on their behalf.
For now, at least, the most credible objections are coming from privacy advocates who worry that allowing insurers to use one of several methods to verify actual car mileage is a scary first step toward a day in which insurers use GPS technology and other electronic devices to track where vehicles go and how aggressively and when they are driven. This isn’t a paranoid fantasy. It is exactly what State Farm, among other insurers,wants to do.
But the state rule bans such tracking of drivers. And by itself, merely allowing insurers to verify mileage isn’t ominous.
The least credible objections come from consumer activists who believe insurance profits might go up thanks to the new rule. Opposing a green, consumer-friendly innovation solely for this reason is bizarre. “Profit” is not a curse word in California. Not yet.
Insurance Commissioner Steve Poizner’s decision to allow pay-by-the-mile auto insurance policies to be offered in California is good news on several fronts.
Consumers should like the new rule, which was fine-tuned for more than a year by insurance officials, because it will give them a new option and create competition. MileMeter, which offers policies in Texas in which motorists can buy from 1,000 to 6,000 insured miles, plans to come to California, and other firms are certain to as well.
Environmentalists and commuters alike should like the decision because it will create a new incentive to drive less, cutting pollution and congestion.
People who believe in fairness should welcome this approach as well. There is no reason why insurance should cost more for those whose use patterns are less risky.
But here is where the issue gets a little murky. When it comes to auto insurance, fairness can be defined in different ways. Poizner’s predecessor as insurance commissioner, John Garamendi, pushed successfully to minimize the use of ZIP codes in calculating auto insurance rates. He argued that it was unfair to punish people who live in areas with a greater prevalence of auto thefts and burglaries.
But insurers said with unassailable logic that the cost of an insurance policy should be based on the risk. A strong argument can be made that it was unfair for the state to change risk-evaluation formulas in a way that made vehicle owners who live in safer areas have to indirectly subsidize the cost of insurance for owners living in less safe areas.
An argument can be made as well that Garamendi was playing politics, since his fellow Democrats are concentrated in urban areas where there are typically more auto thefts and burglaries to drive up insurance bills under the old formula.
We wonder if at some point politics won’t factor into pay-by-the-mile as well. A Brookings Institution study suggests pay-per-mile would reduce premiums for 64 percent of California households. Those whose rates go up because they have to drive a great deal because of their jobs or the length of their commute to work or school are likely to feel aggrieved — and some politician will be willing to grandstand on their behalf.
For now, at least, the most credible objections are coming from privacy advocates who worry that allowing insurers to use one of several methods to verify actual car mileage is a scary first step toward a day in which insurers use GPS technology and other electronic devices to track where vehicles go and how aggressively and when they are driven. This isn’t a paranoid fantasy. It is exactly what State Farm, among other insurers,wants to do.
But the state rule bans such tracking of drivers. And by itself, merely allowing insurers to verify mileage isn’t ominous.
The least credible objections come from consumer activists who believe insurance profits might go up thanks to the new rule. Opposing a green, consumer-friendly innovation solely for this reason is bizarre. “Profit” is not a curse word in California. Not yet.
