Thursday, July 02, 2009

For Real, Pay-Go

The mileage based insurance for autos being proposed in California has some promising aspects. I may be somewhat influenced by having used public transportation on my long commute to Dallas, some years back. It's a great influence on drivers to keep their commute minimal.

Proponents contend that the plan could create a variety of other benefits. Fewer vehicles probably would be on the road, which could curb traffic congestion as well as curtail global warming through the reduced greenhouse gas emissions spewed out of car tailpipes.

Poizner did not say how much the average motorist could save under such a plan. Similar products, which have been tried on a limited basis in 34 states as well as in Canada, Japan and Europe, have saved policyholders money. Premiums dropped by 13% to 54% for GMAC Insurance policyholders, whose mileage was monitored by parent General Motors Corp.'s OnStar satellite tracking system.

But drivers who have long work commutes or live in remote or rural areas might find it more economical to stick with conventional rates not based on exact miles driven.

No one would be forced to buy a pay-as-you-drive policy and no insurance company would be required to offer such a program, Poizner said. Rather, California's extremely competitive auto-insurance market should create "the right kind of financial incentives for insurance companies and consumers to begin to take some bold steps to reduce the number of miles driven," he said.

Major insurance companies, which over the last year have participated in hearings and workshops that developed the proposed regulations, said they were at least conceptually on board with setting rates by the mile.

"The proposal has a lot of merit and is definitely something we might want to explore," said Brian Dwyer, senior vice president for automobile products at Los Angeles-based Farmers Insurance Group, a unit of Zurich Financial Services Group of Switzerland. (On Friday, Farmers finalized its acquisition of Woodland Hills-based 21st Century Insurance, a leading low-cost carrier.)

Motorists who opt for a pay-as-you-drive policy would have several ways to have their mileage measured under the regulations. Those options include odometer readings taken by insurance companies, auto-repair shops or smog-check stations.

Owners could also agree to install in their vehicles electronic transmitters that automatically report mileage to insurers. Insurers, however, would be prohibited from using such devices to monitor where a customer drives.

An environmental quality for insurance is a very good plan. Recent experience has convinced me that the insurance industry is badly in need of better supervision for a variety of reasons. Contributions to environmental quality would be a good start.

For those of you who've been talking with me in comments at eschaton, you already know that I got hit by a truck last week and have had a few revelations about insurance practices. While my car was damaged by a large truck backing up at a low speed, the insurance appraiser declared it a total loss. Today at the auto body shop, I got stares of amazement at that information, an amazement which I certainly understand. The body work is almost minimal, damage to working parts is absent. It's an appalling thought that if I didn't have the resort I've taken, of buying the car back at salvage rates, the amount the insurance would pay me would never get me into another good car like my Honda Civic.

Since my experience, I found out that several people have had this same experience. When a good car with a few repairs would get high offers in a used car market, my suspicions are aroused about how the appraisal relates to the used car value. While I have no direct knowledge of the industry, I can see that a used car dealer would be buying low and selling high. If I didn't have the resort of buying back the car from the insurance company, I'd be facing the opposite aspect. From a minimal payment for my car, I'd be shopping at high prices for a comparable one.

The recent public exposure of insurance companies looking for reasons to turn down claims against the policies they sell is indicative of an industry that is not doing its job. My inside look at what their practices are in appraisal doesn't give me any assurance that there aren't other problems with insurance in overall operations.

There is little insurance regulation in Texas, and I doubt that the pay-go insurance policy will make it here anytime soon. That would be a good influence on us all, though, and I look forward to its development.

Labels: ,


Blogger the bewilderness said...

This is one of the most outrageous scams ever perpetrated by the insurance industry, this business of claiming that if you want insurance coverage that you bought and paid for they take ownership of your car.

I have never understood this. It has every appearance of being illegal, but they say not.
I have every expectation that the insurance industry will extend this practice to homeowners insurance. I have a suspicion they have already done so in NOLA.

12:48 PM  
Blogger Ruth said...

What happened to me was a shock, and I have now heard of others who were dealt a huge loss, and left unable to afford to replace a good vehicle because they were given 'blue book' value, which would not even come close to replacing the original vehicle. This is another example, as you point out, of buying a policy to protect yourself only to find out that it is another form of robbery.

12:58 PM  

Post a Comment

<< Home