This post is by Michael Replogle, Transportation Director at Environmental Defense Fund.
Think back to your last all-you-can eat buffet. Did you eat more than you would have ordering à la carte? The same applies to driving and car insurance. With insurance policies giving almost no consideration to miles driven, if you drive an average amount or less compared to other drivers in your neighborhood, you pay much more per mile for car insurance than high-mileage drivers, which are in the minority. Yet accident risks are clearly linked to miles driven.
Shouldn’t your insurance premium correspond to your risk, saving you money if you drive less? That’s the idea behind Pay-As-You-Drive (PAYD) Insurance – drive less, pay less. Pricing insurance by the mile not reduces premiums for the majority of drivers, but if universally available, would cut traffic by 8 percent, with corresponding reductions in greenhouse gases, air pollution, congestion, and oil imports.