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Justin Horner’s Blog

Fourteen States Say: “OK, let’s have a look at Pay As You Drive Insurance”

Justin Horner

Posted June 4, 2009

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(Thanks to Allen Greenberg at the US Department of Transportation for this lead)

(Updated as of October 9, 2009)

In a previous post, I described Pay as You Drive Insurance (PAYD), its environmental benefits, and some of the progress made here in California in getting it implemented and getting policies in the glove compartments of California drivers.  To wit:

Now, as we know, Californians are driving less, yet many of us are still paying the same for auto insurance.  Shouldn’t we pay less if we’re driving less?  Clearly the answer is yes: low mile drivers subsidize high mileage drivers; poor drivers (who tend to drive less) subsidize rich drivers (who drive more); and without matching the cost of insurance to how much we use (imagine if everyone paid the same flat fee each year for gasoline!) we’re encouraging driving and all its associated environmental problems.

Despite the idea of PAYD being around for decades, it has not taken root to any significant extent anywhere in the country.  But things may be changing…

According to a review of state Climate Action Plans by the New America Foundation, and a recent announcement by the State of Pennsylvania, no fewer than 13 14* states are relying on PAYD as a strategy to combat global warming pollution.  When you add up the annual vehicle miles travelled (VMT) from these 13 14 states alone, you’re looking at nearly 25% of all the miles driven in the United States.

For these 13 14 states, the Brookings Institution has estimated an average per state VMT reduction of 7% if all their auto insurance policies are PAYD, and a nearly equivalent reduction in global warming pollution.  And there may be even more reason to hope.

If you take these 13 14 states, add eight states that already have a type of PAYD product (TX, OR, NJ, MI, MO, AL, LA, and KT), and one state considering legislation on PAYD (WA), you could cover nearly half of all the miles driven in the United States.

Using Brookings’ estimates again, you’d get a national VMT reduction of 4%, and nearly $3.5 billion in individual accident cost savings(!).

Now there’s a long, regulatory row to hoe, and many big states are not even captured here (hello, New York and Florida and Pennsylvania).  Plus, of course, not everyone is going to take out a PAYD policy, even if it’s available.  Nevertheless, there may be a light at the end of the tunnel of our outdated auto insurance system.

And as the National Association of Insurance Commissioners will likely hold a Climate Change and Global Warming Summit this year, PAYD would have to be part of the discussion.

* The 14 states are: Arizona, California, Colorado, Maryland, Maine, Minnesota, New Hampshire, New Jersey, New Mexico, North Carolina, Pennsylvania, Rhode Island, Virginia and Vermont

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Sonia GroblerJun 9 2009 02:23 AM

Thanks to EVERY person that joins the fight against global warming!

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