Much Ado About Nothing? New State Rules for “Pay-As-You-Drive” Insurance (Updated at 4:07 P.M. Below)

I'm guessing his car insurance would be higher than mine. Photo: Clubjuggler/Flickr

Last week, State Insurance Commissioner Steve Poizner announced that his commission adopted new rules allowing and encouraging auto insurance companies to create "pay as you drive" (PAYD) insurance policies. PAYD policies, which charge drivers per mile driven for their insurance, provide another financial incentive for drivers to reduce their vehicle miles traveled. The new rules can be read here.

The state has received a spate of good press for the new rules, most of which uncritically tell readers that they can expect the new policies to be offered as soon as the end of this calendar year.

One might think that a state with a green reputation such as California would be a leader in bringing PAYD policies to its car drivers. However, the new rules have come under fire from environmentalists who say the rules don't go far enough to bring about the changes that California's more green-minded drivers need.

Justin Horner, a policy analyst for the National Resources Defense Council, said in a release today, "Our auto insurance policies are sorely behind the times. No one should be fooled. The new regulations proposed today cannot be characterized as green. They are nowhere close to what is needed to help the environment or reduce global warming pollution."

Horner explains further on the NRDC's Switchboard that California's new rules barely get the state half-way where it needs to be:

As Horner notes, without setting a clear price and requiring insurers to offer PAYD policies, the state is leaving the decisions to the whims of the insurance companies and possibly making the policies less transparent to consumers. Where is the guarantee that any of the insurers will voluntarily offer the reduces rates for drivers who try to do the right thing?

The NRDC notes that strong rules on PAYD programs could lead to a massive reduction in greenhouse gas emissions throughout the state. Unfortunately, California has chosen to be a follower rather than a leader on this issue. Thirteen other states have already included the concept in their Climate Action Plans and some insurance companies on the east coast are even offering incentives to policy holders who commute by transit.

Update 1: Darrell Ng, from the California State Department of Insurance emailed me the following comment, which I agreed to print in full:

(SF Streetsblog's Matthew Roth contributed and edited this article.)