mileage-based auto coverage?
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Joined: May 2001
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From: Nowhere
mileage-based auto coverage?
Texas sets course for mileage-based auto coverage
By Russell Gold and Christopher Oster
Wall Street Journal
AUSTIN, Texas - If Patrick Butler has his way, drivers planning a trip will soon be checking their insurance policies to see how many miles they have left.
Since he retired as NASA's lunar-rocks curator two decades ago, Butler has been obsessed by a more down-to-earth pursuit: persuading insurers to sell car insurance by the mile.
He says many people would benefit from buying an insurance policy that covers 10,000 miles, instead of six months or one year: active-duty military members who are sent overseas, lower-income drivers who could save money by driving less and, most of all, women, who tend to drive fewer miles and therefore have fewer accidents but pay the same rates as men.
After losing legislative and court fights from Florida to California, 71-year-old Butler finally scored a partial victory last month. Texas - the state with the most miles of roads - started allowing insurers to sell mileage-based policies. Meanwhile, legislation to authorize comparable coverage was introduced last week in Georgia.
One insurer, Cleveland-based Progressive Corp., which has tested the insurance in a pilot program, appears ready to jump into the Texas market.
"This is absolutely the future of auto insurance," said spokeswoman Leslie Kolleda.
Other industry players are watching carefully but so far staying on the sidelines. In response to inquiries from customers, the second-largest auto insurer in Texas - Allstate Insurance Co., a unit of Allstate Corp., Northbrook, Ill. - told its agents it plans to avoid the concept for now.
There is no historical data to determine mileage-based risk and set rates, said Allstate Insurance spokesman Justin Schmitt. Switching "would require a massive restructuring of a well-functioning underwriting system," he said.
The idea appeals to Texas drivers such as Wray Hood, a retired San Antonio school teacher. She often carpools to neighborhood meetings, splitting the driving with a dozen friends. As a result, the number of miles she drives a year has dropped by two-thirds, to 5,000. But she is miffed her insurance bill has stayed the same.
"There are some days each week my car is parked," Hood said.
Texas Insurance Commissioner Jose Montemayor expects companies to respond eventually.
"People want it," he said. But insurers "are very conservative in their approach until someone develops a new product and shows that it works. Once they do, all the rest fall in place pretty quick."
Because Progressive's Texas operation is organized as a loosely regulated county mutual company, it was able to test the concept before Texas regulators approved rules allowing it. From 1998 through last year, several hundred participating Houston-area drivers saved an average of 25 percent with mile-based insurance, compared with their previous time-period policies, Kolleda says.
For the project, called Autograph, Progressive leased participants briefcase-size units with global-positioning systems to measure mileage. The technology worked, Kolleda says, but the units typically had to be installed in an auto-service shop - a hassle for drivers and expensive for the company. Progressive hopes this concern will fade as more new cars come equipped with navigation systems.
In the meantime, Progressive has agreed to license the Autograph concept to Norwich Union, a unit of London's CGNU PLC. The company plans a 5,000-automobile pilot later this year, the first attempt to use mile-based insurance in Europe.
Without some sort of tracking system, the program may have trouble getting off the ground. That's because a mile of afternoon driving in rural Texas is a lot less hazardous than the same mile driven at 2 a.m. in downtown Houston, said William Graves, a general manager for Progressive's agent business.
"One big hurdle is finding out when and where the customer drove," he said.
Even getting insurance companies to consider mileage-based policies is a testament to Butler's persistence. A Harvard-trained geologist, he had risen to be curator of NASA's lunar samples. When he left in 1982, Butler took up a cause he deeply believed in: women's rights. He joined the National Organization for Women and was dispatched to Florida to urge passage of the Equal Rights Amendment.
His assignment was to research ERA opponents' claim that passing the amendment would prevent insurers from offering young women lower car-insurance rates. Poring over rate sheets in a Tallahassee hotel room, he discovered that on average women drove fewer miles than men, but paid the same insurance rates. He struck upon a solution: insurance by the mile.
The ERA failed, but the idea stuck. For the next 20 years, Butler drafted model laws and wrote articles for actuarial magazines. But in state capitals ranging from Harrisburg, Pa., to Helena, Mont., the insurance industry has lobbied to kill any bill ordering companies to offer the new insurance.
Last year, the Texas legislature took up Butler's latest bill. To mollify industry opposition, the bill was changed in committee to allow, but not require, mile-based insurance. Butler, who first objected to the optional approach, has since embraced the law as a chance to finally see his idea catch on.
And if it does?
"Maybe somebody will shake my hand," he said.
-------------------------------------------------------------------------
I'm not sure if this would be good or bad. It'd be nice for my S2000 - I could leave it fully insured year round, and not have to pay for the winter months when it may only be driving 20 miles. It'd probably suck for my winter beater, which gets a lot of "stupid" miles (all the long interstate trips) and would be insured year round no matter what. The other thing that would scare me is the (implied) need to have a tracking device in your car. I don't really care to have my insurance company "following" me.
Thoughts?
By Russell Gold and Christopher Oster
Wall Street Journal
AUSTIN, Texas - If Patrick Butler has his way, drivers planning a trip will soon be checking their insurance policies to see how many miles they have left.
Since he retired as NASA's lunar-rocks curator two decades ago, Butler has been obsessed by a more down-to-earth pursuit: persuading insurers to sell car insurance by the mile.
He says many people would benefit from buying an insurance policy that covers 10,000 miles, instead of six months or one year: active-duty military members who are sent overseas, lower-income drivers who could save money by driving less and, most of all, women, who tend to drive fewer miles and therefore have fewer accidents but pay the same rates as men.
After losing legislative and court fights from Florida to California, 71-year-old Butler finally scored a partial victory last month. Texas - the state with the most miles of roads - started allowing insurers to sell mileage-based policies. Meanwhile, legislation to authorize comparable coverage was introduced last week in Georgia.
One insurer, Cleveland-based Progressive Corp., which has tested the insurance in a pilot program, appears ready to jump into the Texas market.
"This is absolutely the future of auto insurance," said spokeswoman Leslie Kolleda.
Other industry players are watching carefully but so far staying on the sidelines. In response to inquiries from customers, the second-largest auto insurer in Texas - Allstate Insurance Co., a unit of Allstate Corp., Northbrook, Ill. - told its agents it plans to avoid the concept for now.
There is no historical data to determine mileage-based risk and set rates, said Allstate Insurance spokesman Justin Schmitt. Switching "would require a massive restructuring of a well-functioning underwriting system," he said.
The idea appeals to Texas drivers such as Wray Hood, a retired San Antonio school teacher. She often carpools to neighborhood meetings, splitting the driving with a dozen friends. As a result, the number of miles she drives a year has dropped by two-thirds, to 5,000. But she is miffed her insurance bill has stayed the same.
"There are some days each week my car is parked," Hood said.
Texas Insurance Commissioner Jose Montemayor expects companies to respond eventually.
"People want it," he said. But insurers "are very conservative in their approach until someone develops a new product and shows that it works. Once they do, all the rest fall in place pretty quick."
Because Progressive's Texas operation is organized as a loosely regulated county mutual company, it was able to test the concept before Texas regulators approved rules allowing it. From 1998 through last year, several hundred participating Houston-area drivers saved an average of 25 percent with mile-based insurance, compared with their previous time-period policies, Kolleda says.
For the project, called Autograph, Progressive leased participants briefcase-size units with global-positioning systems to measure mileage. The technology worked, Kolleda says, but the units typically had to be installed in an auto-service shop - a hassle for drivers and expensive for the company. Progressive hopes this concern will fade as more new cars come equipped with navigation systems.
In the meantime, Progressive has agreed to license the Autograph concept to Norwich Union, a unit of London's CGNU PLC. The company plans a 5,000-automobile pilot later this year, the first attempt to use mile-based insurance in Europe.
Without some sort of tracking system, the program may have trouble getting off the ground. That's because a mile of afternoon driving in rural Texas is a lot less hazardous than the same mile driven at 2 a.m. in downtown Houston, said William Graves, a general manager for Progressive's agent business.
"One big hurdle is finding out when and where the customer drove," he said.
Even getting insurance companies to consider mileage-based policies is a testament to Butler's persistence. A Harvard-trained geologist, he had risen to be curator of NASA's lunar samples. When he left in 1982, Butler took up a cause he deeply believed in: women's rights. He joined the National Organization for Women and was dispatched to Florida to urge passage of the Equal Rights Amendment.
His assignment was to research ERA opponents' claim that passing the amendment would prevent insurers from offering young women lower car-insurance rates. Poring over rate sheets in a Tallahassee hotel room, he discovered that on average women drove fewer miles than men, but paid the same insurance rates. He struck upon a solution: insurance by the mile.
The ERA failed, but the idea stuck. For the next 20 years, Butler drafted model laws and wrote articles for actuarial magazines. But in state capitals ranging from Harrisburg, Pa., to Helena, Mont., the insurance industry has lobbied to kill any bill ordering companies to offer the new insurance.
Last year, the Texas legislature took up Butler's latest bill. To mollify industry opposition, the bill was changed in committee to allow, but not require, mile-based insurance. Butler, who first objected to the optional approach, has since embraced the law as a chance to finally see his idea catch on.
And if it does?
"Maybe somebody will shake my hand," he said.
-------------------------------------------------------------------------
I'm not sure if this would be good or bad. It'd be nice for my S2000 - I could leave it fully insured year round, and not have to pay for the winter months when it may only be driving 20 miles. It'd probably suck for my winter beater, which gets a lot of "stupid" miles (all the long interstate trips) and would be insured year round no matter what. The other thing that would scare me is the (implied) need to have a tracking device in your car. I don't really care to have my insurance company "following" me.
Thoughts?
Joined: Oct 2001
Posts: 8,211
Likes: 135
From: Euclid, OH
I'm not quite sure what they're talking about. My current S2000 policy will list the car as a 'low-mileage' car (don't have the actual policy in my possession yet) , while my Prelude is 'Driven over 12000 miles annually for work or pleasure', so State Farm already takes average mileage into account, and bills accordingly. This isn't exactly like buying by the mile, but it's close.
Telling a State Farm agent that 'I don't drive it much' seems to lower your rates, at least in my case....
JonasM
Telling a State Farm agent that 'I don't drive it much' seems to lower your rates, at least in my case....
JonasM
Thread Starter
Joined: May 2001
Posts: 93,305
Likes: 820
From: Nowhere
You currently buy policies by time - 3 month, 6 month, 1 year being the most common. "low mileage" is probably just an annual cutoff - maybe 3000 miles/year. Above that, you fall into the regular mileage group.
The suggested plan in the article would entail you buying, say, a 10000 mile plan. Whether those 10k miles are driven in 1 month or 1 year is up to the owner. For example, when you bought a new car, you'd maybe get a 15k mile policy, and your car would be insured until it reached 15000 miles.
It would benefit people who didn't drive much, penalize those that drive more. In a roundabout way, it would probably discourage some needless driving ("cruising"), and encourage public transportation and car-pooling for those with long commutes.
The suggested plan in the article would entail you buying, say, a 10000 mile plan. Whether those 10k miles are driven in 1 month or 1 year is up to the owner. For example, when you bought a new car, you'd maybe get a 15k mile policy, and your car would be insured until it reached 15000 miles.
It would benefit people who didn't drive much, penalize those that drive more. In a roundabout way, it would probably discourage some needless driving ("cruising"), and encourage public transportation and car-pooling for those with long commutes.
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