A leading insurance provider has concocted a new way for drivers in Texas to cut their insurance rates while maintaining their coverage: Pay-as-you-drive (PAYD) insurance.
Unlike "lump sum" insurance plans that more often are used when covering cars, the PAYD system involves the installation of a device that not only monitors how often the vehicle is driven, but when it is driven and if the driver is being safe or aggressive behind the wheel.
The cost of insurance will then fluctuate based on the data received by the device, rewarding safe drivers who are on the road less and therefore less likely to get into an accident.
A 2008 report by Brookings on PAYD auto insurance, which hailed it as "A simple way to reduce driving-related harms and increase equity," summed up its effectiveness by saying that drivers with traditional "all-you-can-drive" insurance plans acted similarly to customers an all-you-can-eat restaurant- they overused.
"If all motorists paid for accident insurance per mile rather than in a lump sum, they would have an extra incentive to drive less. We estimate driving would decline by 8 percent nationwide, netting society the equivalent of about $50 billion to $60 billion a year by reducing driving-related harms," the report stated. "This driving reduction would reduce carbon dioxide emissions by 2 percent and oil consumption by about 4 percent. To put it in perspective, it would take a $1-per-gallon increase in the gasoline tax to achieve the same reduction in driving."
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Posted: August 10, 2009
