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11/14/2008 07:25 AM     print story email story  

Texas Gets First True Pay-As-You-Drive Insurance

SustainableBusiness.com News

Texas will be the first state in the U.S. to have a "by-the-mile" choice of auto insurance that gives drivers the opportunity to save money while also protecting the environment.

MileMeter recently launched a pay-as-you-drive (PAYD) insurance program in Texas that will reward low-mileage drivers with lower premiums than traditional, flat-rate insurance.

"Texas drivers now have a choice to do the right thing by their pocketbooks as well as by the environment," said Ramon Alvarez, senior scientist with Environmental Defense Fund. "Pay-as-you-drive insurance policies help to increase our awareness of how many miles we're driving and therefore, think twice before making an optional trip to the store, or better yet, walk, bike or use public transportation to get there instead."

Traditional insurance offers 15% or less mileage-based discounts that don't typically capture the full benefit of driving fewer miles. However, insurers are slowly moving in this direction.

Progressive Insurance has in the last five months also launched partial mileage-based insurance policies in seven states, offering 40 to 60% mileage-based discounts. GMAC Insurance also offers up to 40% mileage-based discounts in several dozen states for motorists with On-Star equipped vehicles.

"By providing a strong monetary incentive to drive fewer miles, these policies also have the added environmental benefit of reducing traffic, air pollution, dependence on foreign oil and greenhouse gases that contribute to global warming," Alvarez added.

A Brookings Institution report released in July estimates that if PAYD were offered to all drivers, it would save two-out-of-three households an average of $270 per car, result in an 8% decline in driving, reduce driving-related damages by $50 billion to $60 billion, and cut carbon dioxide emissions and oil consumption.

Link to that report below.

Website: http://www.brookings.edu/papers/2008/07_payd_bordoffnoel.aspx



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