Esurance adds pay-as-you-drive option in California

John Egan

Esurance is the latest auto insurance company to enter the pay-as-you-drive arena in California.

California Insurance Commissioner Dave Jones has approved Esurance's "Drive Less, Save More" program, which lets policyholders provide odometer readings so they can qualify for auto insurance discounts of up to 15 percent, depending on how much they reduce their driving. The odometer readings are reported when a policy is purchased and renewed. Customers who decrease their driving by as little as 500 to 1,000 miles can score lower car insurance rates.

Esurance is owned by Allstate.

"Giving a discount to low-mileage drivers makes sense," the nonprofit Environmental Defense Fund says on its website. "Imagine if you didn’t pay for gas when you filled up your car, but instead you paid for gas every six months based on the average driver's gas usage. That is basically how traditional car insurance is priced, and it offers no incentive to cut down on driving."

Other insurers that offer pay-as-you-drive programs in California include the Automobile Club of Southern California, State Farm, CSE Safeguard Insurance and the Sequoia Insurance Co. of Marin. Around the country, some insurers monitor motorists' behavior, including how many miles are driven, by having them plug small devices into their cars' data ports.

California's state insurance commissioner initially gave the go-ahead to pay-as-you-drive auto insurance in 2010. In 2008, the Brookings Institution, a nonprofit think tank, estimated that nearly two-thirds of California households would see lower auto insurance premiums under pay-as-you-drive plans.

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