California approves discount auto insurance for driving less

California's department of insurance has approved new regulations to allow companies to sell discount auto insurance called pay-as-you-drive (PAYD), in which consumers only pay for the miles they drive.

Insurance Commissioner Steve Poizner said PAYD expands insurance options for consumers and creates incentives for driving less, which reduces greenhouse gas emissions and can potentially save lives.

California's plan allows drivers to purchase a block of miles at a set price for a set time period. If a consumer runs out of their miles before the end of the policy period they can purchase more miles.

Insurance regulators recently approved PAYD programs in Connecticut, Colorado, Texas and Nevada.

Drivers who purchase a PAYD plan are generally required to have a GPS or electronic monitoring device in their car that measures how much customers drive, at what times of day and how fast.

PAYD programs are growing increasingly popular as a way for consumers to save money and for insurance companies to promote less driving, resulting in fewer claims.

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