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Pay-as-you-drive insurance

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Pay-as-you-drive insurance, also called PAYD or usage-based insurance, is a type of auto insurance that can reduce the cost of car ownership for low-car households. Generally speaking, these policies charge significantly lower monthly premiums for people who drive their car less.

As of 2012, there are four companies that offer such policies in Oregon. One, MetroMile, offers pay-by-the-mile insurance, the purest and simplest form of pay-as-you-drive insurance.

In Oregon, drivers with PAYD policies must generally attach a data logging device to monitor their vehicle's odometer. It plugs into a data port on the car called an OBDII.


[edit] Available programs

As of December 2012, the Insurance Division of the Oregon Department of Consumer and Business Services listed three companies offering PAYD programs, all of them discounts for low-mileage drivers rather than flat per-mile fees:

  • National General Assurance: Available for OnStar customers, it includes six mileage-based discount levels. Discounts range from 50 percent if you drive less than 2,500 miles a year to a 5 percent discount for driving 12,000 to 15,000 miles.
  • Progressive: As part of Progressive's "Snapshot" program, the company offers premium discounts of 5 percent to 25 percent, depending on when you drive and your total mileage. A base discount applies when you begin the program. After the initial period, the discount is based on the mileage and time of day data from your logging device and is reviewed and applied at each subsequent renewal.
  • Travelers: Similar to Progressive's, this program offers a 3 percent discount for participants, plus an additional discount based on the average weekly mileage driven. The discount ranges from 20 percent if you drive less than six miles a week (312 miles a year) to no discount if you drive more than 196 miles a week (10,000 miles a year).

The newest such provider, Dallas National Insurance (sold in Oregon by MetroMile), is not yet listed online, but state insurance policy analyst Cece Newell said Dec. 5, 2012, that it's been fully approved.

[edit] Pay-by-the-mile's history

From 2008 to 2012, pay-by-the-mile insurance was available in Texas from the company MileMeter. In December 2010, MileMeter quoted a minimum PAYD policy at 4.34 cents per mile driven, or $43.40 per 1,000 miles. (The estimate was for a 29-year-old male owner of a Houston-based 1999 Toyota with 120,000 miles on the odometer.)

MileMeter stopped accepting customers in April 2012 after running into regulatory hurdles that prevented its expansion outside Texas. Because the company sold insurance on a prepaid basis for a given number of miles driven, its policies expired immediately after auto drivers crossed a mileage threshold.

Most state regulations, however, essentially require auto insurance to be time-based rather than usage-based.

According to Stacey Newell of the Oregon DCBS insurance division, once you drove more than the purchased number of miles under a MileMeter policy, you would instantly become uninsured. "If they did that in Oregon, they would need to give 10 days' notice," Newell said in December 2010.

[edit] Social benefits

When your insurance bill is based on the number of miles actually driven rather than simply assuming that you'll drive as much as the typical person, it's like a reward for driving less.

In economic terms, PAYD turns one of the major fixed costs of auto ownership into a variable cost. This removes a moral hazard from the auto insurance business -- a perverse incentive to spend more time behind the wheel, because you have to pay for that time anyway.

In practical terms, PAYD policies increase the number of people who can get around by walking, biking or riding TriMet most of the time while still keeping a car around for major errands, emergencies and vacations.

According to the Oregon Environmental Council, "Studies suggest that drivers paying per-mile premiums will reduce driving by about 10% and save up to 25% on their premiums."

[edit] History

[edit] In Washington

The Seattle-based Sightline Institute has been a longtime advocate of pay-as-you-drive policies. In 1995, the sustainability think tank (then called Northwest Environment Watch) commissioned the first study on the subject, by Todd Litman of the Victoria Transport Policy Institute. In 2007, it helped promote a proposal from insurance firm Unigard to introduce such a policy in Washington.

[edit] In Oregon

The Oregon Legislature approved its first tax credit for PAYD policies in 2003, after the Oregon Environmental Council made it their top legislative priority that year.

[edit] External links

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