Pay-As-You-Drive Car Insurance
Published April 21, 2008

The latest New York Times column by pop economists Steven Levitt and Steven Dubner—of Freakonomics fame—focuses on the negative externalities associated with driving. In other words, the hidden costs that are distributed throughout society each time a single driver starts up a car. According to Levitt and Dubner, the three major auto-related negative externalities are worth $20 billion dollars a year in carbon emissions costs, $78 billion dollars a year in traffic congestion costs, and $220 billion dollars a year in accident-related costs.
For traffic congestion and carbon emissions costs, there are already some built-in deterrents—such as wasted time and constantly rising fuel costs—that incentivise driving less. Unfortunately, drivers who only drive a few thousand miles a year, and are therefore much less likely to be involved in an accident, have no similar incentives, such as savings on their car insurance.
Thanks to a pilot program at Progressive Auto Insurance, that may change in the coming years. Drivers that sign up for Progressive's MyRate program will have a wireless device installed in their cars that will calculate how many miles they drive, allowing them to pay only for the accident risk they incur in each mile. According to the Brooking Institution, a widespread pay-as-you-drive approach to calculating car insurance rates could save Americans around $52 billion dollars a year.
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Doesn't sound bad...but you know people are going to go into a war over privacy rights, etc. Would be nice if that wireless device also reported aggressive driving behavior, then I wouldn't have to worry about idiots weaving through lanes and literally "flying."
I guess this means that my car insurance goes up since I drive over 20K/year.
I guess I need to either sale my home, get a new job, or pay more.
I also can't drive 70 miles to my sailboat as often, or I need to get another hobby.
so true,it's amazing the crazies out there who drive like they are the only ones on the road and rarely get caught nearly killing me and crushing my car if i dont look out for them. i bet they get a cheaper rate on their insurance too. i would be in full support of a tracking device that keeps track of speed to discourage those nuts. brilliant!
I think this is a spectacular idea. Need2Change, you're exactly right: under such a plan, those who drive more will pay more. Therein is the logic of negative externalities, and the concept of being responsible for our choices. If the price of paying more for driving more is too much, perhaps there will be actual behavior change in the driving habits of Americans.
I think this is a great idea and long overdue.
Wow, technology has come a long way.
If this takes off, I see urban congestion pricing following closely behind. Cities have always wanted a way to charge fees for using their roads.
This is genius! I live in LA with a 900 zip code, one of the more expensive in the nation. I am moving closer to work to be able to walk to the office-its a quality of life issue for me-so to have an even lower insurace rate because of this would be amazing. This whole philosophy would be great if it could be deployed throughout our civilization--pay as you go. I think we'd see alot of consumption, births, traveling etc. decline.
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