Some interesting information on pay-as-you-drive auto insurance. Present,
prepaid car insurance provides no incentive to drive less.

Tom Mathews
Transportation Issue Leader,
Sierra Club, Iowa Chapter
-------------------------------
Subj:    Re: pay-as-you-go auto insurance technology
Date:   03-07-11 13:07:02 EDT
From:   [log in to unmask] (Todd Alexander Litman)
Sender: [log in to unmask] (Sierra Club Forum on
Transportation Issues)
Reply-to:   [log in to unmask] (Sierra Club Forum on
Transportation Issues)
To: [log in to unmask]

Our Institute has been researching and promoting pay-as-you-drive (PAYD)
insurance for several years. I think it offers one of the best examples of
"Win-Win" transportation market reforms which help achieve economic, social
and environmental problems. Our research suggests that it would reduce
per-vehicle annual mileage about 10%, providing significant reductions in
traffic congestion, air pollution, urban sprawl, crashes and energy
consumption, and it provides direct financial savings to consumers.

A few years ago Progressive Insurance had a PAYD pilot project that proved
the concept is technically feasible and there is consumer demand, but it
was not profitable. It used GPS technology to track when and where a
vehicle is driven, and price based on time and location, which adds
substantial costs and raises privacy concerns, as Eric mentioned. Norwich
Union, one of the largest insurers in the UK, is using the same technology,
which is now somewhat cheaper, but I think is still not the best approach.

We think that a simple odometer audit would be better. This means that at
the beginning and end of your insurance policy term you would take your car
to a certified service station (gas station, oil change shop, emission
inspection station) where your odometer would be checked for signs of
tampering and the reading recorded and sent electronically to the vehicle
registration database. As a result, your insurance could be priced by the
vehicle-mile rather than the vehicle-year. This could be a consumer option,
so motorists would choose which price structure they want, just as
consumers do for telephone service and many other goods.

Recently there has been some progress getting PAYD established in North
America. The state of Texas passed legislation supporting it a couple years
ago, but so far no insurer has offered such a policy. Last week the
governor of Oregon signed legislation that will provide a tax rebate to
insurers that offer PAYD pricing. There is also a national campaign to
promote the concept.

For information see:

"Pay-As-You-Drive Vehicle Insurance," Online TDM Encyclopedia
(www.vtpi.org/tdm/tdm79.htm).

Cents Per Mile For Car Insurance (www.centspermilenow.org) is a website
that promotes “cents per mile” vehicle insurance as allowed by legislation
passed in the state of Texas in 2001.

Aaron Edlin, Per-Mile Premiums for Auto Insurance, Dept. of Economics,
University of California at Berkeley
(http://emlab.berkeley.edu/users/edlin), 1999.

Environmental Defense PAYD Website
(www.actionnetwork.org/campaign/payd?source=edac1) provides information on
a campaign to promote pay as you drive vehicle insurance.

Todd Litman, “Distance-Based Vehicle Insurance as a TDM Strategy,”
Transportation Quarterly, Vol. 51, No. 3, Summer 1997, pp. 119-138. A newer
version of this paper is available at VTPI (www.vtpi.org).

NEW, "NEW Facts: Pay-As-You-Drive Car Insurance," NorthWest Environment
Watch (www.northwestwatch.org/press/payd_facts.html), 2003.

National Organization For Women Insurance Project
(www.now.org/issues/economic/insurance) provides information on efforts to
implement per-mile insurance pricing to improve equity.






At 07:34 PM 7/10/2003 -0400, you wrote:
>----------
>Eric, Do you or anyone know of a person who is following this process
>overseas, and could serve as a contact on this?
>I gather that Norwich Union is the name of the company promoting the pilot
>projects, though that's not explicitly stated.  Any one know of the Brit,
>someone involved in transportation/policy/issues that would know about
>this company?
>
>Jeff
>
>Cover Story NewsCompany
>Global interest in NU 'pay-drive' scheme
>04 July 2003
>
>KEIRON PIM
>
>A pioneering pay as you drive insurance scheme has attracted interest from
>around the world, Norwich Union has revealed.
>
>Media and businesses from countries including the United States,
>Australia, Japan and Brazil have picked up on the hi-tech idea, which will
>begin a pilot scheme later this year.
>
>Spokesman Jenny Chapman said that staff at the insurance giant had been
>"quite astounded by the breadth of interest".
>
>She added that they had received almost twice as many applications for the
>pilot as there were places.
>
>"We have been taken aback by the international interest because the pilot
>scheme is solely in the UK, although we have the rights to Europe," she said.
>
>"More than 10,000 people contacted us wanting to take part in the UK
>pilot. That was enough to fill the pilot twice over and didn't even
>include our own Norwich Union customers."
>
>Much of the international interest has been from companies that believe
>they could offer technological help with the pilot.
>
>Norwich Union has linked up with IBM, who will supply the telematic
>hardware, and Orange to deliver a secure telecommunications network.
>
>"The pilot should start late summer or early autumn, when 4500 drivers
>will have it fitted in their cars for 18 months or two years, which is a
>long enough period to get enough information," said Ms Chapman.
>
>"If it's a success then we can bring it to the market. The whole thing is
>being run from Norwich, it's very Norwich focused."
>
>The system will see a black box fitted in vehicles to calculate monthly
>premiums according to how often people use their cars, at what time of day
>they are travelling and on what roads.
>
>The black box uses technology developed by mobile phone companies to send
>data back to the insurance company each day. Customers will then be given
>far fairer premiums.
>
>Norwich-based technology company Freeboon has been helping NU by
>identifying customers to pilot the project.
>Business Diary 2003    Copyright © 2003 Archant Regional. All rights
>reserved.    Terms and conditions
>Link to article in the Business:
>http://business.edp24.co.uk/story.aspx?brand=BIZOnline&category=Business&tBra
nd=BIZOnline&tCategory=homepage&itemid=NOED03%20Jul%202003%2018%3A00%3A05%3A92
3
>
>
>
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Sincerely,
Todd Litman, Director
Victoria Transport Policy Institute
"Efficiency - Equity - Clarity"
1250 Rudlin Street
Victoria, BC, V8V 3R7, Canada
Phone & Fax: 250-360-1560
Email: [log in to unmask]
Website: http://www.vtpi.org

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