New Study Builds Case for Pay-As-You-Drive Auto Insurance

The more you drive, says a new study, the more you are at risk of getting in an accident. So if how much one pays for car insurance was linked to mileage, there would be a significant reduction in driving - and fender benders.

1 minute read

December 10, 2010, 11:00 AM PST

By Todd Litman


The study was funded by the Conservation Law Foundation. From the introduction to the study, which was based in Massachusetts:

"The Conservation Law Foundation (CLF) and the Environmental Insurance Agency commissioned a study

to assess the risk‐mileage relationship using actual insurance claims information in Massachusetts. This

study ("Ferreira and Minikel 2010") offers the largest disaggregated analysis to date of the risk‐mileage

relationship and the actuarial basis for PAYD. The work analyzes data on $502 million worth of claims on

almost 3 million cars driven an aggregate of 34 billion miles. The study confirms the statistical

soundness of pay‐as‐you‐drive auto insurance pricing and indicates that the PAYD approach would result

in significant reductions in miles driven, green house gas emissions, and auto accident losses without

adverse equity impacts to drivers."

One interesting part of their proposal in regards to planners is the suggestion to charge suburban and rural car owners less per mile than urban car owners.

The full study can be downloaded directly here.

Thanks to Todd Litman

Friday, December 10, 2010 in Pay-As-You-Drive Auto Insurance In Massachusetts: A Risk Assessment And Report On Consumer

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