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With gas prices rising every year, many people are looking for ingenious ways to save fuel, such as taking the bus, the train, riding a bike, or carpooling to work. Yet even with these money-saving tactics, drivers still pay for full auto insurance coverage on their vehicles.
As we all know, there are some corners that just can’t be cut. Or so we think! Many auto insurance companies are beginning to consider a new insurance program that would offer consumers a discounted rate for reduced car use. In fact, some insurance providers already offer trial programs.
A big supporter of this new program is Environmental Defense, an organization that is currently promoting a pay-per-drive (PAYD) insurance program for auto insurance companies across the United States. This innovative concept would link insurance policies to an odometer rather than just a renewal date on the calendar.
According to Environmental Defense, PAYD would not only help save consumers money; it would also help reduce pollution. “PAYD provides a financial incentive to drive less and is expected to reduce driving and congestion by 10-12%,” says an Environmental Defense official. “Driving less reduces air pollution, toxic runoff from roads and impacts on the climate.”
PAYD would also make car insurance more affordable for drivers by giving them more control of their car insurance premiums, a change the National Organization for Pennies Per Mile Women’s group would be happy to see happen. According to the NOW website, low-income drivers often have to bear a higher insurance burden, unjustified by their lower mileage. This burden causes drivers to drop or not renew their auto insurance policies. The new program will help alleviate this problem, reducing the number of uninsured drivers on the road and helping reduce financial pressure on low-income and part-time drivers.
Exactly how does the PAYD program work?
Currently, there are two proposed techniques that could be used to detect car mileage usage. The first method is to install a proprietary odometer that has a built-in cell phone that occasionally calls your insurance company to report your mileage. The other technique would involve installing a GPS device on an embedded phone, such as OnStar, to detail your actual routes.
Many groups oppose this method due to possible privacy breach. However, the GPS device has its advantages. Not only would it track your mileage, but it would also detail where and when you drove. For example, if you travel in a congested area during peak hours, it could cost you more, as opposed to the savings you could receive for driving off-peak.
How much would it cost?
Auto insurance companies would convert a portion of your current annual rate into a per-mile rate. Your auto insurance company would assign your car to one of their rate groups based on your zip code, type, and usage. Once your rate per mile is determined, you will most likely be asked to pay a flat rate up front for your predetermined number of miles. Depending on how much you drive, you could get a refund or pay more.
Testing the waters.
There are currently two pilot programs underway in the United States. One program is through OnStar, which has teamed up with a national insurance company to offer a mileage discount program. This program, offered exclusively to drivers who own GM vehicles equipped with OnStar, will give owners the opportunity to earn an additional discount based on the miles they have driven. GM drivers have the potential to receive up to a 40% discount and save hundreds of dollars annually. Discounts are given to motorists who have driven less than 15,000 miles per year; the lower the vehicle’s mileage, the more significant the discount. Currently, the program is only available in Arizona, Indiana, Illinois, and Pennsylvania.
The other program, offered in Minnesota, is designed for drivers who own a 1996 model year or older. This test study uses a matchbox-sized electronic device that connects to the owner’s on-board diagnostic port (ODBII). Once configured, the sensor detects how much, how fast and when the vehicle is in use. From there, the information is used to calculate the customer discount. This free, voluntary program can potentially save participants up to 25% on their auto insurance … a hefty discount when you’re trying to conserve funds.
Looking for ways to save on auto insurance, but don’t have a PAYD pilot program in your state? Log into Insurance.com’s automatic quote comparison tool. There, you will be able to compare car insurance rates from up to 12 insurance providers, helping you save time and money on your car insurance.
Please note that this description / explanation is intended as a guide only.
For more information on auto insurance, visit: Insurance.com
