New Canadian Study Evaluates Pay-As-You-Drive Vehicle Insurance

New Study Evaluates Pay-As-You-Drive Vehicle Insurance. Identifies
> Significant Potential Benefits to Motorists, the Economy and the
> Environment.*
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>
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> *Pay-As-You-Drive Vehicle Insurance in British Columbia* (
> http://www.pics.uvic.ca/assets/pdf/publications/PAYD_Insurance.pdf )
>
> By Todd Litman of the Victoria Transport Policy Institute for the Pacific
> Institute for Climate Solutions.
>
> ===================================
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> Insurance is one of the largest motor vehicle expenses, costing about
> $1,200 annually for a typical automobile. Conventional insurance is a fixed
> cost with respect to vehicle use; moderate reductions in vehicle travel
> provide no savings to motorists. An alternative price structure, called *Pay-As-You-Drive
> *(PAYD), changes insurance into a variable cost, so motorists save money
> when they reduce their mileage. As a result, they tend to drive less.
>
> A new report, *Pay-As-You-Drive Vehicle Insurance in British Columbia*,
> written by Todd Litman of the *Victoria Transport Policy Institute* for
> the *Pacific Institute for Climate Solutions* evaluates the feasibility,
> benefits and costs of Pay-As-You-Drive insurance in British Columbia. The
> analysis indicates that PAYD pricing could provide significant benefits to
> motorists, the economy, and the environment.
>
> Various studies indicate that reducing vehicle travel reduces crashes. PAYD
> does not simply shift costs from one group to another: premium reductions
> reflect, in part, the savings that result when motorists reduce their annual
> vehicle mileage and therefore claim costs. As a result, it need not reduce
> insurance company profitability.
>
> Under most proposals PAYD would be a user option, so motorists could choose
> the price struc­ture that best meets their needs. Only motorists who expect
> to save money would choose PAYD.
>
> In addition to consumer savings, PAYD pricing tends to reduce energy
> consumption, carbon and other pollution emissions, and traffic congestion.
> It increases insurance affordability by giving motorists a new way to save
> money, and it is progressive with respect to income since lower-income
> motorists tend to drive less than average.
>
> The report evaluates several possible implementation methods. A relatively
> simple approach, called *basic PAYD*, prorates existing premiums by the
> average annual mileage of each rate class, so a $600 premium becomes 3¢ per
> kilometre, and a $1,800 premium becomes 9¢ per kilometre. Mileage can be
> verified with digital photos taken by motorists or insurance brokers at the
> start and end of the policy term. Because it has low implementation costs,
> this approach is predicted to have the largest potential market and provide
> the largest savings and benefits.
>
> PAYD insurance is not currently available in British Columbia but has been
> implemented else­where, including in the United States, Europe and
> Australia.
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> * * *
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> The *Victoria Transport Policy Institute* (www.vtpi.org) is an independent
> research organization dedicated to developing innovative solutions to
> transport problems.
>