What is pay-as-you-drive auto insurance?
- Car insurance is currently sold like an all-you-can-eat meal plan: once you’ve made the purchase, you may as well gorge. Traditional low-mileage discounts don’t come close to capturing the difference in accident risk between high- and low-mileage drivers; those who drive less are penalized.
- Pay-as-you-drive insurance would make buying car insurance more like buying gasoline: the less you drive, the less you pay. Insurers would offer motorists a per-mile rate that would also incorporate existing rating factors, such as a driver’s crash history or geographic location.
- Evidence suggests that low-mileage drivers are a large untapped market.
- For consumers: They would have access to more affordable insurance and would have more control over their insurance costs.
- For society: Initial research estimates that pricing insurance by the mile could cut total driving by 5 to 15 percent, which would slash the huge environmental impacts of the automobile and lessen the number of crashes and claims. A 10 percent reduction in driving is estimated to result in a 17 percent reduction in crashes.
- For taxpayers: Reduced driving would also save money on roadwork. Oregon Environmental Council, a nonprofit group working to pilot PAYD in Oregon, estimates that PAYD insurance could trim the state’s road-related costs substantially over the next 20 years.
- For insurers: They may see an increased market share and a growing reputation as an innovative, customer-oriented, and socially responsible company. They may also have fewer claims.
PAYD in the Northwest
- Oregon: Oregon passed legislation in 2003 to encourage insurers—through a tax credit—to offer pay-as-you-drive insurance. The Oregon government Web site has an article on pay as you go insurance.
- British Columbia: The Victoria Transport Policy Institute maintains information about PAYD.
- Search the Sightline Daily website for updates.
- See the work of the Conservation Law Foundation (CLF) on PAYD, or visit the CLF website.
Published: March 7, 2006