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By-the-Mile Car Insurance Could Cut Emissions, But Privacy Concerns Remain

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Think of it as a phone plan, but instead of minutes to gab each month, you get insurance coverage for a certain number of miles driven in a set period of time. That’s the basic idea behind pay-as-you-drive auto insurance policies. The concept has been tossed around for years as a way to discourage extra car trips and reduce greenhouse gas emissions from vehicles.

vmt-2008-brookingsNow California Insurance Commissioner Steven Poizner has given the green light for regulations permitting and authorizing insurance companies to verify mileage, the Sacramanto Bee reports. These final regulations, originally proposed last year, open the door for insurers to consider pay-by-the-mile plans in the state who previously rejected the option because they didn’t have the authority to double check drivers’ mileage estimates.

But at the same time, the news also marks the launch of a new balancing act in the age of digital privacy issues, with insurers and consumers having to weigh security concerns, access to vehicle tracking data against potential savings.

Progressive Insurance already offers a program in Oregon called MyRate, which provides a discount of up to 25 percent for “low-mileage drivers who install a palm-sized tracker in their cars,” the Oregonian notes. The discount is based on factors including miles traveled, time of day, braking and acceleration — a lot more detailed information than you typically give to a car insurer.

In California, the Insurance Commission’s new regulations say insurance companies can verify odometer miles using a technological device installed on a policyholder’s vehicle, or low-tech methods such as smog stations, repair shops or their own vendors and agents. But the regulations explicitly prohibit insurers from “using a technological device to gather vehicle location data for rating purposes.”

Carmen Balber of the nonprofit policy group Consumer Watchdog tells the Bee that this doesn’t close the book on privacy concerns with verification systems for by-the-mile insurance plans, but will rather give insurers a “foot in the door” to press for data collection methods like Progressive has in Oregon.

In the era of grid-connected cars, smart appliances and open energy information (as Katie has written), and now even attempts at greener car insurance plans, issues of privacy and security will be front and center, as they are in the Internet world.

6 Responses to “By-the-Mile Car Insurance Could Cut Emissions, But Privacy Concerns Remain”

  1. Catherine Maynard

    Costs covered by auto insurance are created by each mile cars are driven. Traditional premiums, however, treat insurance as a cost of simply owning a car without regard to how much it is used, a practice that results in cost-shifting from high to low-mileage cars and artificially raises rates in lower income areas by forcing drivers to pile more miles on fewer cars to drive necessary miles.

    Straight odometer-mile rates let auto insurance customers buy miles at a cents/mile rate classified by garaging location and driver age. Customers buy more miles to stay insured. Customers pay only for the risk consumed in on the road use and must buy more miles to stay insured, like adding gallons of gas to the tank to continue driving. For the first time, the direct tie between total miles purchased and total claims cost for each insurance class allows statistically valid rates to be set for each class.

    Time limits and mileage reporting systems are both unnecessary and detrimental to efficiency but may be required by tradition-bound state regulators overriding insurers’ objections. Like wrangling over “privacy” concerns, these complications reveal faulty understanding of basic insurance principles.