CA Auto Companies Receive Failing Grades in "Pay As You Drive" Insurance Scorecard

California's first-in-the-nation requirement that mileage be considered in annual premiums will benefit the environment, says NRDC

SAN FRANCISCO, CA (January 27, 2009) -- Consumer Watchdog today released a scorecard ranking California’s Top 10 auto insurance companies on how well they reward motorists who drive fewer miles with lower premiums. “Pay As You Drive” (PAYD) insurance strives to directly tie insurance premiums to the number of miles driven. California is the only state in the country, under the provisions of Proposition 103, to require that mileage have the second-largest impact on auto insurance premiums. Tying premiums more directly to the actual miles Californians drive each year will significantly benefit the environment, according to the Natural Resources Defense Council (NRDC). See graphs: http://www.consumerwatchdog.org/images/PAYDgraphs.jpg

“California’s 10 largest auto insurers are not doing enough to implement Proposition 103’s requirement that insurance premiums be tied closely to mileage,” said Carmen Balber with Consumer Watchdog. “Insurance Commissioner Poizner should require insurance companies to offer motorists real savings for driving less. That means lower premiums for achievable reductions in mileage. Drivers and insurers will benefit.”  

“The cars and trucks we drive every day account for more than 33 percent of California’s global warming pollution,” said Justin Horner, policy analyst with the NRDC. “Rewarding Californians for driving less makes sense and financial incentives are an easy way to encourage people to spend less time in their cars, especially during this economy when every little bit helps. Pay as you drive insurance creates pocketbook incentives for consumers to drive less, saves Californians money, improves public safety and helps the environment.”

The best grade among California’s Top 10 auto insurers was a “C,” earned by 21st Century and AAA of Northern California. The companies offer a California Department of Insurance sample driver average savings of just $22 or $21, respectively, for driving 1,000 miles less per year. State Farm, the state’s largest insurance company, earned the worst score, an “F”. To earn any reduction in insurance premiums, customers with State Farm coverage need to reduce their travel to 7,500 miles or less a year. No company offered savings for a driver who reduced her mileage in small increments, necessary to earn it top marks in the analysis. (The scorecard does not rank auto insurance companies’ premiums overall.)

“Pay As You Drive” Scorecard:
Can California Drivers Save By Driving Less?

Grade   Company   No. of mileage categories   Mileage reduction needed to lower auto insurance premium

"C"     21st Century              11                                               1000
"C"       AAA N. Cal               11                                               1000

"C-"    Mid-Century                9                                           1000 or 2000

"C-"       Farmers                   9                                           1000 or 2000
"C-"        Allstate                   8                                           1000 or 2000

"D"      Progressive                 8                                                1500

"D-"       Infinity                     6                                            2000 or 2500
"D-"       Mercury                    5                                            2000 or 3000
"D-"      AAA S. Cal                 4                                            2500 or 5000

"F"        State Farm                 2                                    one reduction at 7500

Data from insurance company filings with CA. Dept. of Insurance; mileage categories are between 15,000 and 5,000 miles

On average, Californians have significantly reduced their driving in recent years. A new Brookings Institution report shows vehicle miles traveled fell by nearly five percent per capita from December 2006 to September 2008. However, a driver who achieved that mileage reduction could easily see no change in her insurance premium with each of the state’s 10 largest insurers. California Insurance Commissioner Steve Poizner has begun to develop regulations requiring insurance companies to better implement PAYD insurance.   

Companies were scored on the number of mileage categories between 15,000 and 5,000 annual miles. Drivers can decrease their insurance premiums by reducing their annual miles driven enough to move into lower categories. Companies with more mileage categories offer drivers more chances to save.

“Insurers would earn a Grade ‘A’ for having many mileage categories with significant premium savings for drivers who are on the road less,” said Balber. “A new Department of Insurance ‘Green Seal of Approval’ should reward those companies who make the grade. Nevertheless, new rules must also protect driver privacy and ensure that all rating factors remain in compliance with the other provisions of Proposition 103.”

Related links:
Link to Consumer Watchdog comments.

NRDC final comments to Californian Department of Insurance.

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Consumer Watchdog is a nonprofit, nonpartisan consumer advocacy organization, on the web at: http://www.ConsumerWatchdog.org

The Natural Resources Defense Council is a national, nonprofit organization of scientists, lawyers and environmental specialists dedicated to protecting public health and the environment. Founded in 1970, NRDC has 1.2 million members and online activists, served from offices in New York, Washington, Chicago, Los Angeles, San Francisco and Beijing.