Two Insurance Companies Apply For PAYD In California

July 8, 2010

The Automobile Club of Southern California has applied to offer Pay As You Drive (PAYD) insurance in the state. Approval of its application would enable the company to participate in what the state’s insurance commissioner, Steve Poizner, calls a “cutting edge” program.

If the pending application of State Farm Mutual Automobile Insurance is approved as well, the two companies would be offering insurance rates based on actual mileage instead of estimated numbers for the first time in the state. "It's just common sense that Californians who choose to drive less should have an option to pay less for auto insurance," the commissioner stated in a recent press release.

There are two variations of the PAYD insurance program in the works. One that just uses odometer readings verified through the insurance companies or their agents or vendors, or a telematics based program that uses a technological device to keep track of actual miles driven.

The premiums for policies using technology to report data are expected to be less expensive than the premiums that are derived at through odometer readings, according to the NU Online News Service. Regulations which went into effect in October 2009 “ prohibit insurers from using the technology to gather vehicle location data for rating purposes.”

State Farm is calling their initiative the “Drive Safe and Save” program. It is estimated that customers that reduce their annual miles driven by a mere 500 miles will save money.

For background information on PAYD insurance see our previous Pay As You Drive (PAYD) Insurance Cuts Premium Costs story by clicking here.

[NU Online News]

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