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February 03, 2005

The Drive Toward PAYD

Mixed news for those of us who have been longing for a real low-mileage discount on our auto insurance: A new analysis of the prospects for pay-as-you-drive vehicle insurance (PAYD) concludes that it's about three years away from broad implementation. The analysis cites a number of barriers for adoption by insurance companies—-such as launch costs, the issue of privacy violations, and patent fees—-but concludes that consumer interest, potential cost savings, and a growing body of research on why mileage as a risk factor makes loads of sense will eventually spur insurers to offer PAYD. (See a full discussion of PAYD benefits in this fact sheet.)

Key quote: "Increasing government focus on road safety, the ability to verify insurance claims using tamper-proof vehicle data and the potential cost savings for insurance companies, commercial vehicle operators and the consumer, will drive the eventual introduction of commercial PAYD."

Todd Litman of Victoria Transport Policy Institute noted that the analysis might be overly cautious, because it focuses on high-technology ("black box") implementation. The timeline may speed up if companies decide to use simple odometer-based pricing, an approach Netherland’s Polis Direct is trying.

Meanwhile, we can vote with our wallets as soon as a Northwest insurer takes the leap.

Posted by Elisa Murray | Permalink