Car insurance is a necessary component of legal driving, but it’s often quite expensive. For those who don’t drive often or very far, the cost can be daunting. Enter… Pay As You Drive (PAYD) Insurance.
Most people don’t consider vehicle insurance to be a significant portion of a vehicle’s total cost, but the fact is: the average driver spends almost as much on insurance as he or she does on fuel. Insurance is considered a fixed cost, and reducing your mileage does not mean a reduction in the cost of your insurance. However, this could be changing.
Studies in the U.S. show that if auto insurance were priced by the mile, drivers would likely reduce their mileage by as much as 20 percent. Because automobiles are the single largest contributor to greenhouse gas emissions, Pay-As-You-Drive could mean a significant reduction in emissions.
PAYD also recognizes that the more miles you drive, the more likely you are to have an accident (annual insurance claims increase with annual vehicle mileage). With PAYD, insurance premiums would be based on miles driven rather than the make and model of a car.
NOTE: PAYD is only available in vehicles that are manufactured in 1996 or newer. Device to be installed in vehicle. Enrollment time for program and discount amount varies by insurance carrier and state.
- For consumers: Access to more affordable insurance and more control over insurance costs.
- For society: Initial research estimates that pricing insurance by the mile could cut total driving by 5 to 15 percent, which would decrease 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 spent 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: An insurer offering PAYD insurance may see an increased market share and a growing reputation as an innovative, customer-oriented, socially responsible company, and may also have fewer claims.