On September 5, 2008, California Insurance Commissioner Steve Poizner proposed regulation under which California insureds could be offered a voluntary option to pay premiums based on verified actual mileage driven. The text of the proposed regulation may be viewed at http://www20.insurance.ca.gov/epubacc/REG/115830.htm.
One of the mandatory factors in establishing rates and premiums for an automobile insurance policy under current California law is the number of miles the insured drives annually. Currently, miles annually driven are based on estimated miles to be driven. Under the proposed regulation, miles annually driven could be based on actual miles driven.
The proposed regulation contemplates three methods for verifying mileage:
- odometer readings by employee or agent of the insurer;
- service records from an automotive repair dealer; or
- the use of technological devices.
Under the proposed regulation, California insurers would be permitted to retroactively adjust premiums based on actual miles driven if notice is given to the policyholder prior to the effective date of the policy. Additionally, an insurer may provide a discount to policyholders reflecting any cost savings or increased actuarial accuracy associated with obtaining and using actual mileage rather than estimated mileage.
Advocates of the proposed regulation cite two reasons in support of the regulation: it should reduce the cost of insurance to certain insureds who drive less and it has a potential positive environmental impact by providing an incentive for insureds to drive less. The sponsor of a pay-as-you-drive bill (Assembly Bill 2800), Assemblyman Jared Huffman (D-San Rafael), has withdrawn the legislation in light of Poizner's proposed regulation. The Consumer Watchdog, a consumer advocacy group, is supporting the proposed regulation.
The California Department of Insurance will hold a public hearing on Monday, October 20, 2008, on the proposed regulation. The public also has until Monday, October 20, 2008, to submit written comments on the proposed regulation.