For those who have a car but don't drive much:
What is pay-as-you-drive auto insurance?
Car insurance is currently sold like an all-you-can-eat meal plan: once you've made the purchase, you may as well gorge. Traditional low-mileage discounts don't come close to capturing the difference in accident risk between high- and low-mileage drivers; those who drive less are penalized.
Pay-as-you-drive insurance would make buying car insurance more like buying gasoline: the less you drive, the less you pay. Insurers would offer motorists a per-mile rate that would also incorporate existing rating factors, such as a driver's crash history or geographic location.
Evidence suggests that low-mileage drivers are a large untapped market.
For consumers: They would have access to more affordable insurance and would have more control over their insurance costs.
For society: Initial research estimates that pricing insurance by the mile could cut total driving by 5 to 15 percent, which would slash the huge environmental impacts of the automobile and lessen the number of crashes and claims. A 10 percent reduction in driving is estimated to result in a 17 percent reduction in crashes.
For taxpayers: Reduced driving would also save money on roadwork. Oregon Environmental Council, a nonprofit group working to pilot PAYD in Oregon, estimates that PAYD insurance could trim the state's road-related costs substantially over the next 20 years.
For insurers: They may see an increased market share and a growing reputation as an innovative, customer-oriented, and socially responsible company. They may also have fewer claims.
PAYD in the Northwest
Oregon: Oregon passed legislation in 2003 to encourage insurers--through a tax credit--to offer pay-as-you-drive insurance. Oregon Environment Council (OEC) sponsored the bill and is seeking an insurance partner for a 24-month trial of PAYD and building a database of consumers interested in PAYD.
Washington: A PAYD pilot project will soon start in Washington State, under the sponsorship of groups including King County Metro, Seattle City Light, and Climate Solutions.