TomTo traffic congestionWe have, by including a special category for Pay As You Drive on the Car Insurance Blog, given recognition to the importance to this distance based car insurance product. Pay As You Drive allows drivers to only pay a car insurance premium equitable to the distance that they travel – and hence the risk that they present.

But what are the benefits of Pay As You Drive? Are there more benefits than the potential benefit of reduced premiums?

A recent research paper has revealed just how significant the benefits of Pay As You Drive Might be! The recently-released study of PAYD in the United States, “Pay-As-You-Drive Auto Insurance: A Simple Way to Reduce Driving Related Harms and Increase Equity,” was published by the Hamilton Project at the Brookings Institution.

This study releases exiting findings from research in California:

* PAYD would result in an 8 percent driving reduction from light-duty vehicles.

* Estimated gross annual social benefits from an 8 percent driving reduction total $10.8 billion based on current driving levels, and $21.1 billion based on 2020 projections.

* The California state government would save $54 million annually based on 2006 data and $60 million annually based on 2020 projections.

* PAYD would generate 7 to 9 percent of the total CO2 reductions needed to meet California’s emissions targets for 2020.

* Nearly two-thirds (64 percent) of households in California would have lower premiums under PAYD. The average savings for that group would be $276 per vehicle per year (in 2007 dollars).

* Low-income drivers would benefit especially. Every household income group making less than $47,500 (in 2001) saves on average. Even in higher income groups, a majority of households are better off.

* For every ethnicity, a majority of California households would save money with PAYD, contrary to the claims of some groups that PAYD would disproportionately impact certain ethnic groups.

* Because geography is a key risk-factor, a roughly equal proportion of rural (62.4 percent) and urban (64.2 percent) California households save money with PAYD.

We believe that Pay As You Drive car insurance will become ever more important – not only to reduce car insurance premiums, but also as a tool to combat CO2 emissions and protect the environment!!

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