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.
Inside sources tell me that the device which is attached the car's computer (generally in newer, post 1999 production cars, and not compatible with hybrids) will also monitor things like sudden braking, so aggressive drivers will pay extra. Trip info will be accessible by the user on the web, and privacy concerns should be allayed somewhat by the fact that while distance driven will be recorded, location will not be. It is scheduled for rollout in Illinois in the fall.
In my opinion this would be mostly fair, we have many factors to consider here and pollution is an important one. I like the concept, we need to think more responsible and stop arguing.
Garry, Cheap auto insurance
What it really means is that low mileage drivers with safe driving habits will be entised to switch to Progressive. The remaining policyholders will represent a higher risk pool and their rates will have to increase to reflect the increased risk in the pool.
In other words, if this program succeeds it affects all of us in one way or another.
This sounds like a great idea for people who don’t use their cars so often. I work for a New York green contractor who provide free bus/subway passes that I use to get around the city each day. I only use the car for family vacations, so having more realistic car insurance that accounts for only the small amount of time during the year I actually use the car would be fantastic.
I think this is a wonderful way of paying your insurance. I am tired of paying lots of money in one go... without even driving as much as others do... Because I have a Nissan I was always forced to pay the High Risk Auto Insurance, which costs quite allot.
I'll be interested to see how much pay-as-you-go insurance ends up costing at the end of the day. The phone companies have tried this as well, and the result was a more costly alternative for people that don't want to pay a flat rate. I'd presume the same will hold true with auto insurance. I expect that I'll keep paying my monthly auto insurance rate, but I do look forward to hearing more about flexible auto insurance payment structures. I suppose there is a convenience here that shouldn't be overlooked, but for me it's all about the bottom line.
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