Monday, May 16, 2011

Pay-As-You-Drive Vehicle Insurance

Todd Litman of the Victoria Transport Policy Institute has released a new report on Pay-As-You-Drive Vehicle Insurance in British Columbia or PAYD. In BC, Litman suggests that motorist get the option of using the current system for insurance or opting into PAYD if they could save money. PAYD insurance works by taking a reading of a vehicle's odometer at an insurance broker and charging you based on the actual kilometres travelled. It's a win-win because motorist that drive less, save more while motorist that drive a lot, pay the same rate. Beside saving the motorist money, PAYD insurance also saves the insurance company money. Research shows that people who drive less, have less crashes.

Crashes per vehicle-year tend to increase with annual mileage.
PAYD insurance is also good for the environment.
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 allowing motorists a new opportunity to save money, and it is progressive with respect to income since lower-income motorists tend to drive less than average. It can help achieve ICBC policy objectives including traffic safety, social equity, consumer affordability, emission reductions, and infrastructure cost savings.
The good thing about PAYD insurance is that it's already being used in other parts of North America and in Europe. Check out Litman's report, it's worth the read.


Tim said...

Yes this would be great!! My wife and I have 2 vehicles between the 2 of us and I hardly drive mine. We are considering getting rid of mine but it is fully paid for. I only drive it around 5000 km each year but it costs me around $1100 in insurance. ($0.22 per km).

We drive my wifes car since it gets better fuel economy.

Most days I either cycle to work or take the bus. So most of the year my car sits there costing me $1000 in insurance. Car sharing doesn't work so well since the nearest car share location is 7 km away and would take 1/2 hour to get there by bus/skytrain.
Paying insurance for a car you hardly use but only keep it for the convenience that it brings is a disincentive to ride the bus or cycle.

Nathan Pachal said...

Yes, it makes lots of sense, plus it's a positive way to give people a reason to drive less.