Thursday, August 03, 2006

Pay-as-you-drive car insurance?

The Times of Trenton has an article this morning about an idea to reduce our driving; paying for our insurance on a per-mile basis.

No, I didn't say lower our insurance costs. I said reduce our driving:

With pay-as-you-drive, insurance factors such as driving history, vehicle type and geographic location are incorporated into the per-mile price, which generally ranges between 2 cents and 10 cents. Mileage readings are captured through sensors in cars or authorized odometer readings.
Advocates say that if people could save money by reducing miles driven, instead of paying a lump-sum annual or semiannual premium, they would take fewer trips or be more likely to use other forms of transportation. Studies have estimated the concept could reduce overall driving by around 10 percent.
"It's almost a no-brainer when you look at reducing gasoline use and conserving oil," said Dean Baker, director of the Center for Economic and Policy Research, a Washington, D.C., think tank.
Maryland state Sen. Lisa Gladden (D-Baltimore), who has sponsored pay-as-you-drive legislation, said she tried to show the appeal of the concept by bringing a pound of grapes to a legislative hearing.
"I said, 'If this pound costs a dollar, but I only eat half of them and you still charge me a dollar, is that fair?'" Gladden said. "That's the way we as consumers do business with auto insurance."

Well, it would be more fair, anyway. I used to work in insurance, back in the day before GoogleMaps and Mapquest made mileage determiniations easy, and folks would often insist that they drove 3 miles to work so they could get the lowest rating level- even if they lived in Burlington and worked in New Brunswick. The company I worked for didn't check, although some did. Also, I know when I wasn't working outside the home, we put almost as many miles on my car as my working husband's, because we drove my car on every vacation and every single weekend trip, plus around-town and school driving- but I was rated the lowest usage tier because I wasn't employed. A monitored per-mile driving would be more accurate.

It would also show people the more accurate costs of driving. We all know people who spend their weekends driving from store to store to get the "best price" on purchases. Well, if they take into account how much it costs in gas (and time!) to do that, plus the environmental impact of driving thirty miles to save a buck, they'd realize often it makes financial sense to stay put and pay a bit extra.

But it will take a very long time, if ever, before such a system is enacted. How many people do you know who refuse to get EZ Pass because they don't want Big Brother watching how fast they drive on the Turnpike? They'll never accept this. Could the information on how you drove be subpoenaed? Who has access to it? I can already hear the protests starting. Also, the insurance industry isn't known for their quickness in adopting new technologies or systems, so don't plan to hear it coming too soon.

If it was sold as something to reduce our insurance premiums substantially, it might have a shot here in Our Fair State; but I refer back to that EZ Pass analogy, which was originally supposed to make life easier and tolls cheaper- but now costs more for the convenience.

Oh well- another good idea that has little chance.

(On a side note, this was front-page on the Times this morning, even though it's not currently even proposed in Our Fair State. Must be a slow news day.)

1 comment:

ben51688 said...

Neat post. I'm an 18 year old who told Sen. Gladden (mentioned in the article) about this concept. Sen. Gladden and I have worked on PAYD initiatives in Maryland for several years, introducing and passing legislation in Baltimore city and introducing state-wide legislation in MD encouraging and making PAYD available. I'd be happy to discuss this issue with you and the readers of this blog.

-- Ben Hyman