Los Angeles, California – California’s Department of Insurance has proposed a regulation that would allow insurance companies to offer auto coverage plans that are paid for by the mile. Similar to prepaid minutes for cellular phones, the plan would allow drivers to prepay for a certain number of miles for a specified amount of time.

The regulation would also allow insurers to offer discounts for those who opt to purchase a mileage verification policy, whereby drivers pay for miles actually driven, instead of the estimated number currently used as a factor in determining rates. Methods of verifying mileage include odometer readings by an insurance agent or broker, automobile repair centres, smog check stations, self-reporting, or a device installed in the vehicle to monitor miles driven. Regulations prohibit insurers from using such devices to obtain a driver’s location.

Such programs would also provide an incentive of premium discounts for not operating over a predetermined number of miles, encouraging residents to drive less, with a resulting drop in congestion, fuel consumption and emissions. The Environmental Defense Fund estimates that if 30 per cent of California drivers purchase a pay-as-you-drive policy, it could eliminate 55 million tons of CO2 emissions and save 5.5 billion gallons of gasoline through 2020.

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