Dean Baker: Pay-As-You-Drive Insurance Comes to Brookings

[marmar]

from CommonDreams:



Published on Tuesday, August 12, 2008 by CommonDreams.org
Pay-As-You-Drive Insurance Comes to Brookings
by Dean Baker


Many of the ways to reduce greenhouse gas emissions will require major changes in behavior and/or impose serious costs. However, there is one mechanism that could lead to substantial reductions in emission with no cost: pay-as-you-drive auto insurance.

The basic point is simple. With current policies, most people will pay the same amount for their insurance whether they drive 500 miles or 50,000 miles. However, their risk of being in an accident is clearly greater the more miles they drive. If we can have insurance prices reflect the increased risk, it would mean both better insurance pricing and giving people a substantial disincentive to drive.

The impact would be large. The average cost of insurance per mile driven is close to 8 cents. This means that if insurance were paid on a per mile basis, for a car that gets 20 miles to a gallon, pay-as-you-drive insurance would provide the same disincentive to drive as a $1.60 a gallon gas tax. This can easily lead to reductions in gas consumption and greenhouse gas emissions from the auto sector of 10 percent or more.

The great part is that it doesn’t even raise driving costs on average, it just makes a fixed cost - the annual insurance premium - into a per mile cost. Since people will now presumably drive less and therefore have fewer accidents, they should actually end up paying less on average for insurance.

I first wrote about this a decade ago with my then colleague at the Economic Policy Institute, Jim Barrett. Others had written about pay as you drive even earlier, such as Patrick Butler with the National Organization for Women, Daniel Khazzoom at San Jose State University, Todd Littman at the Victoria Transport Institute and Aaron Edlin, now at Berkeley. The reason for mentioning pay-as-you-drive insurance now is being discussed in the mainstream of the economics profession. Two researchers affiliated with the Brookings Institution recently wrote a piece touting the merits of pay-as-you-drive insurance. .......(more)

The complete piece is at: http://www.commondreams.org/archive/2008/08/12/10939/

[Newsjock]

1. A fantastic idea ...

... if you want to depopulate Montana, Wyoming, and North Dakota, just for starters.

[jdlh8894]

2. What does MPG have to do w/Insurance? n/t

[magellan]

3. And how is mileage determined?

The only way to do this would be to install a small GPS device in every car to keep track of and automatically report mileage.

No thanks. Enough of my privacy has been revoked for corporate profits already.

[enid602]

4. report

You can go to an authoized reportng station (say, a gas station)the same day each month to report the mileage. Your private driving habits do take on a social significance as greenhouse gas emissions rise and fuel shortages loom.

[magellan]

8. How much will it cost and how long will I have to wait

If everyone is having to report this each month, we'll need a lot of reporting stations.

[tech3149]

6. Bull! Don't make things more complicated than they have to be

Most states already require yearly safety inspections and the mileage is marked on the inspection sticker. It wouldn't be much of an expense for states that don't to implement a basic program. No privacy issues to deal with and no massive investment in technology.

[magellan]

7. FL doesn't

:shrug:

And I'm not making it more complicated than it has to be. The UK is already moving in the GPS in every car direction to keep track of mileage. If you think it can't happen here then you haven't been paying attention.

[shraby]

5. There will be massive unhooking of speedometers and

rollbacks. It won't work

[Trillo]

9. Here's some other ideas.

Only insure the driver for anything he might be driving, in addition to charging the driver a per-mileage charge. Forget charging more for each additional vehicle.

And don't forget the need to find tax revenues that are not tied to gasoline.

Every bicycle probably needs to be charged for "distance-traveled", which opens the possibility of taxing based upon usage of roadways, regardless of fuel used even if the fuel is food.

Additionally, because we shouldn't be hypocritical, and since walkways and sidewalks are expensive to create and maintain, lets also charge for walking, but miles might be kind of a large distance unit to use, so that should probably be a "per-foot" charge. Better add wilderness and unimproved areas into this, because if people can avoid charges by walking on the ground instead of the sidewalk, they will, and the ultimate point is to maximize revenue to the corporatist by any means possible.

Just think of the possibilities. Charge for distance traveled. Brilliant!

Don't forget the Internet! Charges should be based upon bits sent as well as distance they traveled!

[gratuitous]

10. An idea worth exploring

Right now, Oregon is experimenting with turning the DMV into an arm of the INS, requiring all sorts of proof of legal residence as a prerequisite for issuing a driver's license. Since folks will continue to drive anyway, with or without a license (my guess, but I think I'm quite right), and they can't get insurance without a license, we're about to see a big up-tick in uninsured and underinsured motorist claims. I'm not sure how Allstate, Farmers and Progressive are going to like that, but I'm guessing the answer will be "not very much."

But with insurance paid for out of a gasoline surcharge levied at the pump, every vehicle pays into the insurance pool. Licensed, unlicensed, legal vehicles and even stolen vehicles will all pay the premium. Additional insurance for catastrophic accidents could be purchased by each individual, but we could move to a no-fault world of auto collisions. Your car is fixed, your medical bills are paid, your lost wages are reimbursed if due to an auto accident. Non-economic damages might very well pass away.

And your insurance premium is based on how much you actually drive, rather than on the simple fact that you own a car.