One of our supporters recently wrote us with an excellent question about Pay-As-You-Drive car insurance (PAYD), a new approach to insurance that rewards motorists for driving less (see previous posts):

“How will PAYD affect people in small communities, especially those without public transportation?”

PAYD was designed to give drivers more control over their insurance rates AND provide an incentive to drive less, thereby mitigating the negative impacts of driving: climate pollution, toxic runoff from roads, automobile accidents, and the need to build expensive new traffic infrastructure. Our donor wondered if PAYD would adversely affect people in rural areas who have to drive greater distances to get supplies, seek medical attention, or go to church.

We took the question to Chris Hagerbaumer of the Oregon Environmental Council, a group that is working to bring PAYD to Oregon. She pointed out several reasons why rural drivers stand to benefit as much as urban motorists from PAYD:

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  • – Rural drivers are in a separate insurance pool than urban/suburban drivers. Because they drive under less risk-prone (i.e. less congested) situations, they pay lower auto insurance rates. These lower rates would also apply to PAYD-drivers in rural communities would pay lower per-mile rates than urban/suburban drivers. Miles driven are simply an additional risk factor that PAYD would take into account when calculating insurance rates (other factors include age of driver, driving record, and place of residence). It makes sense: the more you drive, the more chance you’ll be involved in an accident.

    – What’s more, in Oregon at least, driving habits between urban and rural residents are not that different. The Oregon Department of Transportation (ODOT) recently compared counties east and west of the Cascades and found that the eastern counties averaged 6,751 VMT per capita in 2000, while those in the west averaged 6,017 VMT per capita.

    – Finally, the PAYD options currently under consideration are voluntary. HB 2043, a bill that the Oregon legislature passed in 2003, encourages insurance companies—-through a tax credit—to “test drive” the PAYD concept. It does not force insurers to convert all rates to PAYD, nor would an insurance company choose to do so. In other words, no one, urban or rural, will be forced to purchase PAYD insurance.

    – Posted by Stacey Panek