Pay-as-you-drive insurance—a new way for families to save money on car insurance and a new incentive for low-oil, climate-friendly transportation—is finally coming to Cascadia!
As the Seattle Post-Intelligencer reported yesterday, the US Department of Transportation has committed the remaining funding needed to start a $6 million ground test of pay-as-you-drive car insurance in Washington.
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Here’s the background: In 1995, Sightline (then Northwest Environment Watch) commissioned the first research on the subject of PAYD (or mileage-based) insurance from Victoria Transport Policy Institute’s Todd Litman. Todd went on to become one of the concept’s leading developers, and Sightline has been promoting the concept in countless ways ever since. A few years ago, we helped win passage in Oregon of a tax credit for insurers willing to write by-the-mile policies. As of yet, no insurers have taken the bait.
For the past three years, in cooperation with a coalition of organizations organized by Bill Roach (of King County Metro until his recent retirement), we’ve been trying to get a pilot project launched in Washington. (Bill is a Cascadian hero who helped create two other game-changing transportation innovations earlier in his career: Flexcar and U-PASS. It’s been an epic journey, but we’ve finally reached our destination. And the eventual payoff could be big—from more affordable insurance for low-income residents to making a dent in King County’s contribution to climate change.
Where can you sign up? Well, with the insurance company Unigard, but not for a few months. (Please post a comment below if you’re interested in signing up! Sightline will announce when Unigard begins sign ups.)
And don’t expect by-the-mile savings just yet. To calibrate as-you-drive rates, the pilot is designed to gather data for three full years before a commercial product is marketed.
This go-slow approach is, of course, frustrating, considering how long we’ve all been waiting and how large the potential benefits are. But I served on the committee that evaluated the many proposals from insurers to work on this pilot, and I can say that Unigard’s plan makes excellent sense. In the long run, it’s worth it to gather the data needed to satisfy actuaries and regulators first.
It also makes sense to test the privacy and reliability of the technology systems to be used (the system will gather data on vehicle miles with GPS). Privacy is a key to public acceptance. Within a few years’ time, Unigard will be able to make pay-as-you-drive a mainstream offering. And, in the meantime, others in the insurance industry aren’t standing still. They’re developing their own pay-as-you-drive plans.
Please post a comment below if you’re interested in signing up for pay-as-you-drive insurance in Washington.
Assuming that the commercial product is eventually offered, who will pay for the GPS units in cars?
It’s an interesting question, and one I cannot answer.In the pilot phase, the technology will be paid for by the project.The commercial product will flow from what’s learned in the pilot. Who pays for the onboard technology hasn’t been determined.
I’m curious whether Pay-At-The-Pump, as advocated by Lovins et. al., was considered? Rejected as politically unfeasible? Including collision insurance in the price of gasoline avoids all the GPS expense and complications, though it does confound mileage and vehicle efficiency …
great news, but do note, that PAYD has been available in Oregon since 12/06 via Progressive’s TripSense plan.
I am interested but I have to admit some reservation about having a GPS in my car tracking my driving habits and providing them to others.
I broke down and bought a Jetta a few years ago after being car-free for a couple. Though I use biodiesel and leave my car parked on most days, I still feel guilty and know I am throwing a lot of money down the drain on fuel, maintenance, monthly payments, and, YES, insurance. I’ve been following the pay as you go concept for some time and think it makes brilliant sense. Please let me know when this becomes available and thanks for the great work driving this.
peter,I hadn’t yet heard that Progressive has expanded its own pilot to Oregon. That’s great news.Progressive’s version of PAYD, tested already in a few other states, is light-weight. It’s not truly an as-you-drive plan, just a souped-up low-mileage discount. Still, it’s encouraging.P.S. Pay-as-you-drive is advancing quickly now in Europe, where many big technology and insurance companies are pursuing the concept. To track what’s developing worldwide on Pay-as-you-drive, if you’re willing to read some poorly translated English, check out: <a href='http://terra.es/personal/smp00000/home_archivos/Pay_as_you_drive_directory.htm'> this Spanish siteor <a href='http://payasyoudrive.wordpress.com/tag/uncategorized/'>this one for the latest update
I’m interested in this concept. Very interested and have wondered why it isn’t possible for years. But I have to wonder also about the GPS unit. I’m not someone who has shopping club cards from Fred Meyer, QFC and Safeway because I don’t think I need to give away my shopping habits to massive corporations. Why do I want to give them my driving habits/whereabouts? Isn’t there some other way they could do this? Alan, can you address this concern and how it is being worked around please?Thanks!Charlie
I’m definitely interested. Is the goal just to track # miles traveled, or is the goal to use the GPS data more intensively, i.e. to charge different rates based on how fast you drive, or what kinds of neighborhoods you park in, etc.? If it’s just about VMT, it would be a lot easier to just have them check your odometer every year than to fuss with the GPS.Progressive’s system seems like it’s more about giving a 25% discount to people who don’t exceed 75mph and don’t drive after midnight, which seems like a reasonable idea… but I see that as as a separate issue vs. how much different the cost of insurance should be for somebody who drives 5,000 miles/year vs. 40,000 miles/year. Probably the 40K person shouldn’t pay 8x as much, but my impression is that currently they don’t even pay 1.5x as much…(is there a list out there somewhere of which insurers offer low mileage discounts and how substantial they are? I couldn’t find one…)
Charlie,When I sat on the selection committee, I reviewed about six proposals—four of them competitive—for implementing PAYD pilots in Washington. The winning proposal was/is pretty comprehensive in its GPS monitoring. Others didn’t track whereabouts at all. In fact, one proposal used a clever, inexpensive device that simply indicates the amount of time each day when the vehicle is moving—not its speed, distance, or anything else. The presumption was that by-the-minute insurance wouldn’t vary so terribly much from by-the-mile insurance. Maybe right. Such an approach would probably satisfy you better than the one we ultimately chose. We chose it because, overall, it was the best plan: the most transparent with data, the most likely to yield a transformation in the insurance market, etc.Charlie and David, An audited odometer-based pay-as-you-drive system would also be possible and I expect such offerings will enter the market eventually, too. They’re the prefered option of Todd Litman, one of the leading thinkers in this field. And I can’t think of a reason they wouldn’t work well. But most insurers are as interested in the time when you’re driving (after midnight is associated with lots more accidents) and how you’re driving (e.g., aggressive driving) as they are in the distance you drive. The high-end GPS system that Unigard will use (described below) lets them gather that type of information, too.Ultimately, I believe that gathering lots of data at this stage will lead to simpler, lower-tech approaches in subsequent stages of development for PAYD. That is, we’ll be able to identify the best correlates of accident risk. We’ll also be able to develop enough data to show how much driving behavior changes with PAYD pricing, which should be useful for things like public policy discussions (does PAYD reduce emissions or traffic deaths enough to warrant public subsidy or public mandate?) and approval by insurance regulators.David,You’re right about Progressive’s TripSense system. It’s at least as much about time-of-day and driving behavior as it is about mileage. Unigard’s plans to experiment with pricing that’s much closer to by-the-mile.Here’s the description that the US Department of Transportation distributed about the Washington pilot. It reveals some more details.”This pilot will install the field-tested Intelligent Mechatronic Systems’ iPAID global positioning system (GPS) mileage recording devices on a sample of approximately 5,000 vehicles, collect baseline data needed to model the options for a PAYD premium structure, select the best premium structure, and roll out and test it in the State of Washington. In addition to mileage, iPAID collects data on zip codes where driving occurs, total driving time, speed, time and day usage, routes, and aggressive stopping and acceleration, some of which may be incorporated into the premium structure. The study has both a pre-implementation and implementation phase. “Study participants will be recruited from Unigard policy holders and will be randomly assigned into experimental and control groups. A minimum of three billing plans will be tested, with possibilities including paying up front for miles, receiving frequent bills for miles driven, or receiving a discount at term-end based on miles driven. Additionally, half of the participants in each experimental group will receive free transit passes and/or other transportation vouchers along with the PAYD insurance. “Participant surveys before, during, and after the study phase will address issues of customer satisfaction, changes in travel modes and travel behavior, use of transit passes, and intentions to continue with their current insurance policy. A control group, whose mileage and claims’ rates will be measured just as for the experimental groups, will receive discounts based on traditional risk factors.”It’s a pretty good study design, as commercial pilots go.On privacy: Unigard’s technology uses military-grade encryption to ensure that your data won’t go to anyone but your insurer. That’s close to standard in this field, now.So the privacy issue is really about whether you trust your insurer to have information about where you go and when. Many people don’t trust their insurer and won’t sign up for such plans. That’s fine for them. It’s also no real obstacle to commercial success.In the insurance market, a big market share might be 10% of policies in a state. So a data-rich (and somewhat intrusive) pilot like Unigard’s, which won’t appeal to privacy-conscious consumers like Charlie, may nonetheless lead to a commercial product that can achieve a big commercial success. Surely 5 percent of policy holders won’t care about their vehicles being tracked by location. Consider the parents of teenagers, for whom tracking whereabouts and aggressive driving may be a positive rather than a negative. Consider the owners of luxury cars who will have an added theft-thwarting tool in the form of a GPS onboard that tells them (or the police) where to find their car.Besides, as I’ve argued, more-anonymous PAYD plans will likely follow this more-intrusive one. Oh, and one other thing: anyone who uses a bank, debit card, ATM card, credit card, checking account, email account, or telephone is entrusting highly personal information to a corporation, usually a large one. Is there reason to be more concerned about entrusting your insurer with travel information than you are about trusting your cell phone company with your calling record?
Alan,Interesting point about the cell phone and bank companies. I hadn’t thought of that. Though, as I do, I guess I’d like to see a system developed that doesn’t start with having all my information in the hands of anyone as the default. I let the cell phone company have my calling record because, at this point, what choice do I have? But as the PAYD schemes are set up, I’d like to see them not be developed to give the insurance companies blanket access to information like that. It just doesn’t seem like a fair trade to me. There’s just too many instances of information like that being stolen, or worse yet, subpeoned by the government and companies just handing it all over. I sound a bit like a conspiracy theorist, but in this day and age of an information economy, it seems like it would be in our best interest for new plans to be set up with a default where the consumer keeps control of his or her information instead of it being sold for him or her en masse.Anyway, a bit OT…. Thanks for the explanation anyway. I’ll keep an eye out for less intrusive versions of PAYD in the future.
I am SOOOOOOO interested. Having a car is an unfortunate necessity and luxury…one I try to go with out mostly but inevitably count on for certain things. Please let me know when this is available! Thanks
Please sign me up. Altho I drive very little (walk to work, Flexcar, etc) I have been considering replacing my 22 year old car, just cannot quite make that jump into car-less-ness…but I’m definitely a borderline case. [Re GPS: I was recently considering a car that did not have an alarm system, but did have a GPS for tracking the car if it is stolen, another positive reason for having it.]
Sign me up as well. I am sick of paying the same amount of insurance for someone who might be driving their car 3 times a day while I might drive my car 3 times a week (and I know there are many factors that result in exactly how much you pay). I want to drive even less, and when I do, I hate to feel like my money is going down the drain.
Cheers to Sightline for pushing for this long overdue program! If Oregon’s got it, why has WA waited?? Sounds like the pilot may not give me immediate cost savings, but if it’s not more expensive than standard auto insurance, I’d gladly participate. State of WA would do well to provide an INCENTIVE for pilot participators. Free gas? Discount on first year of PAYD program when it launches? PCC discount? Free oil change certificates? Is there an advisory board some of us can get on???
I keep going on the internet looking to see if PAYD is offered yet where I live. Finally I found this sight. I am very interested. Not just in pay as you drive miles but I’m actually OK with paying more if you are an aggressive driver. Why not your more likely to wreck, you should pay more. I am a very safe driver and it’s frustrating that I’m probably paying as much for insurance as the people who race by me at 100 mph on the freeway. I too am borderline on selling my car because of insurance. I like having it for trips and to do my field work up in the San Juan Islands once a year but other than that it sits there and I pay for it to sit there. I’m considering FlexCar but haven’t, as someone previously said, taken the leap into carlessness. If I could get PAYD I would keep the car for sure. Anyway sign me up for the pilot, but as Reba said it would be nice to have an incentive. for it 🙂
I have been waiting for this. It is nice to see an insurance company start a PAYD program. I’m tired of paying for other folks bad driving habits. Please sign me up.
Like everyone else my family has been waiting for years since the concept was introduced to me in college. I’ll be very excited to get a chance to pay less for our limited driving. Sign me up!
I would love to be involved in this pilot program. I am a quadriplegic and require drivers to transport me. However, I put very little mileage on my van, only traveling a few miles away from my house to go grocery shopping and doctors appointments. Please include me in your pilot program if you have room for me. I would be most excited to be involved in this pilot program. Contact me as soon as possible, or as soon as this program has launched. Thank you very much and this is a program that is a long time coming.
Hi there—this is Elisa from Sightline. Thanks for for everyone’s interest in the pilot. Just to reiterate, as far as we know, Unigard is not yet signing folks up for this program, but as soon as we have information on that we will post it!
I am very interested in the PAYD program, not sure why it’s taking so long to kick off, but if we can do anything to push Unigard along let us know
I too am very interested in participating in PAYD. As a very infrequent car user who also has a very safe driving record, I (and many others I know) would definitely support an insurance company that can forward this strategy. Like the last poster, I would be interested in knowing how I could help this program along. Please keep me in the loop!
Patrick B. McGrath
Please include me on the announcement when Unigard goes live with the program. Thanks for all your work!
Please include me in the announcement as well. I’ve been hoping a program like this would be instituted in WA for about six years now.
I’m definitely interested in the announcement. Thanks!
Pleeeeeeeeease include me. Please. My wife and I own 2 cars and drive about 12-13,000 miles per year – that’s the total for both cars. If we didn’t frequently both need to drive (Darn those Eastside buses that shut down at 6:30pm!) we would most likely own only 1 car. I already bike to work a lot and take the bus for errands. If I’m paying by the mile, I’ll probably cut into those miles even more.I’m usually pretty paranoid about privacy issues, but not in this case. The insurer will realize that the cars sit in the garage most of the time. When I do drive, it’s off-peak times but not late at night and I’m about as boring a driver as can be. (I drive for Metro and drive my car as cautiously as I drive my bus) In short, an insurer’s dream.
I see it is a five-year study. If I can still sign up, I’d like to! Can’t beleive we don’t already have such a system in place!
I would also be interested.
How slow our technology seems! Although I am somewhat uncomfortable with having my ‘whereabouts’ being trackable, I would like to here about this program when it becomes available in Washington state. As I have become older, my car sits in the driveway much of the time. I am investing in a motorized 3 wheeled trike and use it for much of my needs. No gas, no insurance!! But, on the occasions that I do use my car, pay as you go insurance would be a great savings for me. Please keep me posted!!
Yes! I don’t drive my car much at all, but still need it for occasional outings that flexcar rates are not compatible with! I would love to not be wasting so much money on high insurance fees! I definitely want to try out pay-as-you-go insurance.
I’m quite interested in the idea of pay-as-you-drive insurance, pilot or commercial. Keep us informed.
Count me in – this makes total sense for me as I ride my bike to work 4x per week.
For the longest, I have tried to get my insurance provider to come out with something like pay-as-you-drive. I have 8 total cars/truck with only 5 drivers in the family. At any given time there are 3 autos that are not being driven or exposed to damage, especially liability. I’m sure the insurance industry will be against P-A-Y-D. Why does this type of policy take an act in each state legislature? You know insurance has lots of lobbiest. If your car is in the garage, your insurance provider has no risk, but draws and premium as is it were driven every day. Not fair!!!!
R on Beacon Hill
Would appreciate your comments, Alan, on the Pay At The Pump version of this, which I recall reading about some years ago. Some cents per gallon is added to the motor vehicle fuel tax to pay into a fund to cover vehicle accidents on a no-fault basis.This always seemed to me to be reasonable—larger more expensive vehicles burn more fuel, thus would pay a higher rate. And people who drive very little would of course pay very little.Ralph Nader and the trial lawyers hated the idea, of course, but for everyday folks, it seems like the most painless way to go, and doesn’t risk personal privacy. I hate the thought of an adversary subpoenaing my GPS data from my insurance company.
Too late. Now that I spend more for insurance than I do for fuel… I find it is time to quit bleeding cash. Twice as much. So fuel may be 10 cents a mile – but insurance is over 20 cents per mile. If you want to help the insurance industry get anything more out of me, then get them going. This lame delay is a smokescreen for continued plundering. This should have been an easy deployment and fast rollout. This is intolerable. And a stupid business move for insurance… since they are just proving how they are failing to serve policy holders.. ooops, I forgot,,,course, they are serving stockholders nicely. Aside from a pollyanna attitude, am I missing anything?
If it is still possible, I would be interested in signing up for this pilot.
Greetings Alan, this is great news! I am interested as a consumer but also as a manager of a municipal parking system. I’d like to tie participation in this program to reduced rates for permit holders…pay as you go parking! Now THERE’S a reason to leave the ol’ beast at home! Looking forward to more information. cheersO
I keep reading that PAYD insurance will be available in Washington in Summer 2010… Since that is when I will need to start reinsuring my car, it sounds perfect! Except there is hardly any detailed information out there. What is going on at this point in the PAYD saga?
Also interested. Is this project alive? Are there any commercial insurers in WA offering it?
Hi Robert (and others still interested)–please get in touch with Nate Kommers (email@example.com), who may be able to put you in contact with Uniguard insurance.
I am sick of paying the same amount of insurance for someone who might be driving their car 3 times a day while I might drive my car 3 times a week (and I know there are many factors that result in exactly how much you pay). I want to drive even less, and when I do, I hate to feel like my money is going down the drain. http://www.gpscardvd.com
Good article Alan. Such schemes are beneficial for those who drive less frequently. The pay as you go car insurance is really a great idea where you can save money on car insurance and you have to pay only when you drive. This form of insurance requires the driver to install the tracking system or in-car tracker. Since it determines the precise mileage covered by the car it has become more refined and dependable so that the drivers’ bills can be made accurately. Besides, this device acts as a tracker for safety-minded people. This insurance has created a vast divergence in the premiums paid by these car owners. If you use fuel efficient cars that are within your means you will get added advantage. This is because premium is computed per mile and so if you are not using the car then there is no need to pay insurance premiums.This will also be an advantage for young drivers or teen drivers which find out how your teen is driving or need to improve in driving skills. http://carinsurancetemporary.co.uk/