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According to a recent report in the Sacramento Bee, California drivers are a little bit closer to a type of pay-as-you-drive insurance policy that would essentially allow people to purchase auto insurance in much the same fashion as they do gasoline.

California Insurance Commisioner Steve Poizner released new regulations that authorized and permitted verification for pay-as-you-drive mileage, but did not specify the form such plans should take. The goal behind such a program is to encourage residents of the Golden State to drive less, thus reducing the amount of traffic congestion there is, and lowering the number of traffic accidents typically caused by congested streets.

Pay-as-you-drive programs already exist in other states. One such program, currently in use only in Texas, is MileMeter, which offers six-month insurance policies that allow anywhere from 1,000 to 6,000 miles. When the miles run out, the driver must purchase more.

Bee reporters spoke with MileMeter founder and CEO Chris Gay, who said. "We absolutely anticipate coming to California.  Our take is that half the market out there is being overcharged and underserved -- and that's who we aim to address."

While Mile Meter is unique, other, more mainstream pay-as-you-drive programs also exist. Most of these involve year-long policies based on projected mileage, which, at the end of the term, either bill the driver based on actual mileage, or refund money, depending on either verified odometer readings, or data from an electronic tracking device attached to the car. Such policies generally use the age or type of the vehicle, or various other factors, in determining the per-mile price of the policy.

Representatives from Allstate, Progressive, and State Farm insurance companies told reporters they were considering the issue, but were uncertain about offering pay-as-you-drive in California.

Under California's Proposition 103, which was approved by voters roughly twenty years ago, insurance premiums are already partly-based on miles driven. Despite this, insurers claim they have never had the authority to adequately verify actual mileage, which has resulted in an oft-abused honor system. In an attempt to encourage more insurance options, the new regulations allow both mileage-estimate and mileage-verified insurance policies.

Poizner says pay-as-you-drive programs are a way to connect insurance costs with accident risk, and also provide an incentive to use alternative transportation, such as biking, walking, or using mass transit. Said Poizner, "Economic conditions are tough. The opportunity to actually get a big discount on your auto insurance by driving less? ... It will be very attractive."