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Pay-as-you-drive auto insurance plans picking up steam

Is the auto insurance industry becoming like the cell phone industry, where consumers can pay for what they use instead of paying a set amount for services each month? It's increasingly looking that way.

California recently approved plans by State Farm and the Automobile Club of Southern California to offer pay-as-you-drive insurance. In New York City, transportation officials are asking insurance companies to submit proposals for pay-as-you drive insurance options, and Massachusetts is considering a pay-as-you-drive system as well.

auto insurance pay as you drive

“The New York State Insurance Department encourages insurers to develop innovative products which benefit consumers, especially when they help keep down the cost of premiums,” New York Insurance Superintendent James Wrynn says.

“Pay-as-you-drive discounts may also have a positive environmental impact by encouraging people to develop better driving habits and minimize unnecessary automobile travel. However, we need to make sure these programs don’t compromise privacy rights or the financial protection consumers expect to receive when they buy insurance.”

In California, insurance customers with State Farm or Automobile Club of Southern California can begin opting for pay-as-you-drive in February.

State Farm drivers can get a 5 percent discount by either self-reporting their odometer readings at the beginning and end of each policy period, or by allowing State Farm to access mileage automatically if a vehicle is equipped with an active OnStar system. Consumers who reduce their mileage by as little as 500 miles a year are expected to see savings.

Automobile Club of Southern California policyholders can reduce their rates from 1 percent to 10.5 percent by agreeing to report their odometer readings, or installing a device in a car to let the insurance company automatically record mileage.

"The voluntary pay-as-you-drive initiative is an innovative program that will allow insurers to offer plans based on more accurate mileage, so that people who choose to drive less will pay less for auto insurance," California Insurance Commissioner Steve Poizner says.

More employees exiting employer-backed health programs

Think most people get their health insurance through their employers? Think again.

According to a Gallup Poll released in mid-December, 45 percent of American adults reported getting health insurance through an employer, down from 50 percent in January 2008, when Gallup began tracking the statistic.

Also, 26 percent of Americans reported having health coverage through government programs like Medicare, and 16 percent of adults reported not having health insurance at all, according to Gallup.

15 states get Medicaid boost for kids

Sometimes, your quality of health care depends on where you live.

pay as you drive auto insurance

On Dec. 27, U.S. Department of Health and Human Services Secretary Kathleen Sebelius doled out $206 million to 15 states for making “significant progress in enrolling uninsured children in Medicaid.”

To secure this money, states had to make it easier for families with eligible children to gain coverage, and had to document a significant increase in the number of kids enrolled in Medicaid. Funding for these bonuses was included in Children’s Health Insurance Program legislation that was passed in 2009.

"These performance bonuses demonstrate our support for the effective strategies these states have undertaken,” Sebelius says.

The 15 states and the amounts they received:

• Alabama, $55 million.

• Alaska, $4.4 million.

• Colorado, $13.7 million.

• Illinois, $15 million.

• Iowa, $6.8 million.

• Kansas, $2.6 million.

• Louisiana, $3.6 million.

• Maryland, $10.5 million.

• Michigan, $9.3 million.

• New Jersey, $8.8 million.

• New Mexico, $8.5 million.

• Ohio, $12.3 million.

• Oregon, $15 million.

• Washington, $17.6 million.

• Wisconsin, $23 million.

“The fact that Alabama is one of only 15 states receiving a performance bonus, and we are receiving the largest bonus, demonstrates the effectiveness of our program," Alabama Gov. Bob Riley says.

“Receiving this bonus obviously means a lot for our state budgetwise," Riley says. "More importantly, it means ensuring a struggling family out there never has to choose between putting food on the table and filling a child’s prescription.”

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