Across the globe many environmental protection agencies and NGO’s have recognized the threat of global warming and the need to protect the environment. Nature conservationists and scientist are often fighting side –by side in developing strategies to protect our environment.
Few of those protecting our environment would be aware of another rather unlikely source of environmental protection – car insurance, and more specifically Pay As You Drive Car Insurance!!
We have discussed on the Car Insurance Blog the nature of Pay As You Drive Car Insurance and also how to measure Pay As You Drive Car Insurance. But what possible impact could PAYD have on protecting our environment and reducing the effects of global warming?
Todd Alexander Litman from the Victoria Transport Policy Institute has provided a fascinating insight on this topic by sharing a testimony to be presented at the Senate Environment and Public Works Committee by Deron Lovaas of the Natural Resources Defense Council. This addresses the topic “Opportunities to Improve Energy Security and the Environment” and makes a specific mention of the opportunity presented by Pay As You Drive Car Insurance [PAYD].
We would like to refer to the argument in favour of PAYD as car insurance option and mechanism to protect our environment:
- Low-mileage drivers are subsidizing risk for high-mileage drivers; this results in distorted price signals for the costs of car insurance and driving.
- Converting the variable portion of insurance costs into a per-mile cost for drivers – a system known as Pay as You Drive (PAYD) – will correct these price signals.
- Research shows that the majority of drivers in the U.S. would actually save money under such a system, since the current subsidy to the smaller pool of relatively high-mileage drivers would be eliminated.
- States in the US are taking note of the advantages and pollution reductions afforded by PAYD. No fewer than 14 states are relying on PAYD as a strategy to combat global warming pollution, and expect PAYD alone to contribute on average 3% of their state’s total emissions reduction. In all cases, PAYD is projected to have either no cost or to result in net savings.
Why are American drivers not using PAYD and still driving with one-price-fits-all car insurance policies?
- There are still many regulatory obstacles to insurance companies offering PAYD policies.
- Many insurers are unwilling to explore PAYD because of uncertain start-up and administrative costs.
- An essential element of PAYD is to guarantee insurers the right to verify mileage and adjust premiums accordingly. Many insurers are unsatisfied with current methods of mileage collection and their attendant cost.
- Insurers appear to lack confidence in the ability of drivers or other 3rd parties to accurately and honestly report their mileage to them.
- There is still not a consensus definition of PAYD. This makes it difficult for policymakers and regulators, not to mention insurers and consumers, to identify exactly what they are striving for.
It is argued that these obstacles should be overcome if we are serious in achieving the goal of protecting the environment.
How could Pay As You Drive Car Insurance [PAYD] protect the environment?
If PAYD policies were made an option for all drivers, between 20-40 percent of drivers could be expected to use it as a way to reduce auto insurance premiums. Allowing PAYD as an option in all states could generate savings of 56 million barrels of oil in 2020 and almost 60 million in 2030.
Considering car insurance options such as PAYD is “thinking outside the box”. Pay As You Drive Car Insurance offers definite advantages to car owners in search of affordable car insurance premiums. A recognized by-product of driving less is a reduction in emissions. By driving less we will not only be able to save on car insurance premiums – but also protect our environment!
Also view:
- What is Pay As You Drive [PAYD] Car Insurance?
- How is safe driving measured for Pay As You Drive Car Insurance?
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Tags: Pay As You Drive, payd