insurance

Car insurance for less, and less driving

While critics bemoan the privacy aspects of pay-as-you-drive programs, the saving nationwide could be big. According to a July 2008 report by The Brookings Institution, the Washington D.C.-based nonprofit public policy organization, if all motorists in the country bought auto insurance per mile, two out of three households would save an average of $270 per car per year.

Insurance companies only want mileage

For GMAC, which offers a discount of up to 54 percent to customers who drive less than 2,500 miles in a six-month premium period, mileage is the only thing the Detroit-based firm is tracking. Drivers need to have the OnStar system installed in their car to be eligible, says GMAC Senior Vice President Wade Bontrager. Drivers who go less than 15,000 miles a year also are eligible for a discount. To get a discount of up to 26 percent for the premium period, you would have to drive 7,501 to 10,000 miles per the policy period. If you don't have OnStar in your car, the system's cost of $199 to $299 per year may offset some of the savings.

Safeco Insurance, which is piloting a program in Illinois, doesn't have to contend with any privacy concerns. It relies on self-reporting and third-party odometer readings to confirm how much a driver goes. But in order to see savings, you couldn't drive your car very much. People who drive 5,000 miles or less get a 20 percent discount for as long as the mileage stays low, says Chris Allen, Midwest regional general manager at Seattle-based Safeco. Typical policies are six months long.

On top of saving money, the programs can have another positive impact. According to Brookings, the driving reductions from a pay-as-you-drive program would lower oil consumption by 4 percent, which also saves consumers money while reducing carbon dioxide emissions in the U.S. by 2 percent.

"It encourages people to drive less," says McEldowney of Consumer Action. "You're not just saving on gas and auto insurance. ... It helps the environment."

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