Auto Insurance by the Mile May Mean Less Driving

Auto Insurance by the Mile May Mean Less Driving

California, looking for any and all ways to cut air pollution, is moving to allow insurance companies to use mileage verification for pay-as-you-drive policies. Studies have shown that per-mile pricing lures drivers to alter their habits, which then reduces air pollution, congestion and traffic accidents.

In Texas, insurance companies like MileMeter, already offer six-month policies of 1,000-6,000 miles that drivers refill when their miles run out. The company wants to move into California where State Farm, Allstate and Progressive insurance companies are considering offering a yearlong policy based on a projected mileage. All the insurers are also considering offering such policies nationwide, noting they would either refund or bill their insured drivers based on how much they went over or under the measured mileage or estimated mileage.

Privacy advocates believe insurance companies want to install electronic devices to track miles driven, but there are other options. Odometer readings by agents, DMV records or states with smog-check stations could all provide the verification.

A study by the Brookings Institute confirmed the environmental and economic benefits of by-the-mile insurance pricing. If all of the countrys drivers adopted this type of policy, driving would drop 8% nationwide and oil consumption would fall by 4%. Two-thirds of U.S. households would save an average of $270 per car.