California's insurance commissioner announced a proposed rule yesterday allowing auto insurers to offer drivers the option of policies based on close monitoring of their mileage.

The new regulation was promoted by Commissioner Steve Poizner as "green auto insurance." It would benefit the environment by reducing auto emissions as motorists cut their mileage.

"Any incentive like this to get people to drive fewer miles will help reduce greenhouse gases and vehicle accidents," he said in a statement.

Under the regulation, if a policyholder opts for "Pay-drive" usage based insurance, their carrier could verify mileage by installing an electronic monitoring device in the vehicle. The insurer could check the odometer or examine mechanical service records.

Mr. Poizner said he would not approve any carrier mileage monitoring utilizing GPS devices in order to obtain location data from consumers, calling it "vital that the privacy of drivers remains intact."

In fact, it was noted that Mr. Poizner founded a company that pioneered technology to install GPS receivers into cell phones.

Pay-drive insurance, he said, "more accurately reflects driving habits." California auto insurance regulations currently require that rates are based on annual mileage based on policyowners' estimates. The new regulations will provide the additional voluntary option for actual mileage.

Mr. Poizner's statement said the regulation would explicitly prohibit insurance companies from requiring policyholders to participate in a pay-as-you-drive program. A copy of the regulations is available at www.insurance.ca.gov.

Once the regulation is adopted, Mr. Poizner said he would expect the new rule to take effect "no later than fall 2009. Insurers will then be able to apply to offer this product in California."

The commissioner cited the Environmental Defense Fund's estimate that if 30 percent of Californians participate in this voluntary coverage, California could avoid 55 million tons of carbon dioxide gas between 2009 and 2020--the equivalent of taking 10 million cars off the road and burning 5.5 billion less gallons of gasoline.

Additionally, Mr. Poizner's announcement noted that the California Air Resources Board has recommended adoption of pay-as-you-drive as one means to meet future climate change gas reduction targets.

In the statement, Mr. Poizner promised continued efforts to "benefit the environment." One is his recent approval of an insurance policy enabling homeowners with conventional homes to rebuild to the latest environmental standards after a loss. Coverage would be provided for costs such as green recertification fees and other additional "green" expenses.

He also is backing legislation allowing insurers to make paperless filings with his department.

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