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While backroom conversations drag on in Metro Vancouver about how to beat congestion by financing more public transit, a simple, easy solution is standing by, begging for attention. Vancouver filmmaker Cliff Caprani is the latest advocate of pay-as-you-drive (PAYD) insurance, trying to get enough signatures on his online petition to prove to the Insurance Corporation of B.C. that there is consumer interest in the scheme.
Insurance Corporation of B.C. (ICBC) is keeping an eye on this option, but is basically uninterested, claiming a lack of customer interest. The fact that ICBC has a monopoly on car insurance in British Columbia and would have to do a lot of work for no significant economic return is also a big driver in its intransigence.
PAYD, or distance-based insurance, is a proposal to base insurance costs, in large part, on mileage. Instead of the current all-you-can-eat model (pay once, drive endlessly), under PAYD, the less you drive, the less you pay — on the assumption that accident rates are related to time spent driving.
For a province like British Columbia with aggressive greenhouse gas reduction targets, this is a no-brainer. Recent research by the Brookings Institute in the U.S. found that using this pricing model would reduce private vehicle travel by about 8 percent and reduce emissions by 2 percent, as a result of people deciding to cut down on discretionary trips to save insurance costs.
In California, if everyone adopted PAYD insurance, two-thirds of households would save an average of $276 a year per vehicle, according to the Brookings study. That’s 24 billion fewer miles driven every year and 1.2 billion gallons of gas saved. That would mean lower emissions, less congestion, lower highway maintenance costs, fewer accidents, lower police and health care costs, less oil dependency, and cleaner air. That’s all without any new taxes, any new transit, any new tolls, or any new bureaucracies.
There are downsides: A third of California households, based on the Brookings Institute study, would pay an average of $393 more per vehicle. But some University of British Columbia researchers have proposed combining PAYD with a vehicle levy based on fuel efficiency. That would allow heavy mileage drivers to lower their PAYD insurance bill by converting to more fuel-efficient vehicles.
The other big objection is privacy. The most common way to measure mileage is through a GPS device planted in the car, raising fears of invasive snooping. But let's put this in context: General Motors offers a PAYD-like program using OnStar, which already knows where every GM vehicle customer is at all times. Your cell phone provider already knows where you are. Your credit card provider already knows where you are shopping. But if that’s a deal-breaker, either pass up the offer of cheaper insurance, or follow the advice of Todd Litman of the Victoria Transport Policy Institute (www.vtpi.org/paydbc.pdf). He advocates reading your car's odometer once a year to determine how far you've driven, which is how it's done in Belgium and the Netherlands. A U.S. startup, Milemeter, relies on customers to prepurchase blocks of insurance based on mileage. If they drive after their pre-purchased block is used up, they're not covered. No snooping required.
PAYD insurance is now an option in Ontario, the United Kingdom, Netherlands, Italy, France, Spain, Australia, Japan, Israel, South Africa ,and in 19 U.S. states (in some, mileage is combined with data on driving after midnight and sudden stops and starts). Two car insurers in California, including State Farm, the largest U.S. car insurer, are waiting for official approval to launch their PAYD plans, likely next month.
ICBC at least owes B.C. drivers a pilot program to test these innovations. If they’re working everywhere else, why wouldn’t they work in B.C.? And if ICBC doesn’t like PAYD, can it really defend fairness simply by saying it bases insurance rates on a driver's record (you crash, you pay)?
Continuing indifference to PAYD amounts to monopolistic dysfunction in the face of measurable social, environmental and economic benefits.
Nothing moves in B.C. on PAYD until ICBC shows some interest — or gets an order from the provincial government to get moving.
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Comments:
Posted Wed, Aug 25, 10:15 a.m. Inappropriate
In Japan they mandate cheaper insurance rates for fuel efficient mini cars (and mini-trucks - you should see them). It seems like a less invasive way to achieve the same goals. It also may be fairer. With pay per mile we would be taxing rural and farm communities where a lot of driving is not discretionary.
Posted Wed, Aug 25, 11:01 a.m. Inappropriate
From an actuarial perspective, an insurance company is going to charge drivers in accordance to the risk they pose to the fullest extent possible. This means that the more information is available, the better. It makes more sense that the number of miles be a factor, but not the only factor, since the more traditional information such as prior claims and demographics are also reliable indicators of risk. If a GPS system is used to measure mileage, it is also possible to distinguish between urban and rural miles, and it is also possible to determine who is speeding.
Since there are goals here besides the insurance company's profit and a fair rate for customers, what is the best way to incentivize PAYD? Especially for a company that has a monopoly on a given market, any scheme that reduces the overall amount of driving is also going to reduce profits for the insurance provider. Regulation? Financial incentives? Or will a competitive market provide PAYD options in absence of public policy?
Posted Wed, Aug 25, 12:06 p.m. Inappropriate
Once again, it bears repeating that people are not just little plastic soldiers to be moved about on a central planner's map. People are individuals. They have their own priorities, goals, dreams, ambitions, likes, dislikes, feelings, emotions and desires. They are not a fungible mass that can be shaped into a bureaucrat's model of The Perfect Citizen. When government tries to reshape people to match it's priorities, rather than the other way around, there's a name for that kind of government: Authoritarian.
Central planners may find it virtuous to use the power of the state to coerce people into acting against their self interest, but just like the kicked dog that eventually turns on its master, the people will ultimately revolt. If automobiles are so vile and repulsive to government, let government ban them outright, and let the Transit Nazis face down the populace on this issue once and for all. I know what the outcome would be, and so do they; which is why they're trying instead to nibble motorists to death like so many carnivorous ducks.
Posted Wed, Aug 25, 3:20 p.m. Inappropriate
"ICBC at least owes B.C. drivers a pilot program to test these innovations. If they’re working everywhere else, why wouldn’t they work in B.C.?"
This opinion piece has not shown that PAYD is "working everywhere else". It can't because it isn't. PAYD has been implemented in a small number of places, nowhere near everywhere.
Insurance companies in WA state already have something similar to PAYD. My insurance company classifies vehicle use with a corresponding expected annual mileage. When getting an insurance quote, they ask about the commute mileage and such to determine expected use. Since I work out of my house, as does my wife, both of our vehicles are classified as 'pleasure' use with expected use 5000 miles/year and our insurance cost is less.
Encouraging people to drive less has an unintended negative impact on safety. People who drive less are less experienced drivers with a corresponding lack of driving skills. Not that most drivers in WA state would notice.
Posted Wed, Aug 25, 5:52 p.m. Inappropriate
"LotusRally" makes a sage point. If miles driven corresponded in a positive way to probability of incurring an accident, the freeways would be littered with commercial trucks.
Posted Wed, Aug 25, 9:21 p.m. Inappropriate
I had a PAYD policy when I lived in New Orleans. The GPS system had the feature of measuring and reporting those few times when I could actually coax my four-cylinder sedan above 70 mph. I think it's a good idea to get people to slow down because it reduces the risk of accidents, so I didn't mind that; the NASCAR wannabes in the deep south wouldn't be so happy with such a system. One thing I did mind about the GPS was the company's measure of "rapid starts and stops." On suburban boulevards with traffic lights that are not in sync, rapid stops are as much the result of red-light timing as tailgating or other bad driving habit.
I liked the *idea* of the system, but the real situation turned out to be a lot less than I expected. My rate did not go down that much--only around 10%--even though I drove my car only 2-3 times per week on average. Part of the reason was that I had to pay for the high rate of car thefts and non-driving damage that occurs in New Orleans (keying, break-ins, etc.). Another reason is that I let my insurance lapse for a three week period in 2003 when I was out of the country, and I paid for that outrageous moral shortcoming for the next three years. In short, insurance companies will always find a way to get their pound of flesh, PAYD or no. Why anyone would defend them in the name of a mythical "free market" system of insurance is beyond me.
I had two other friends whose driving habits were the same as mine, who lived in a neighboring parish, and who did not have the insurance lapse problem. Their rates went down by 30%, and they were really happy that I turned them on to the program.
So maybe I'm not the best example because of the difference in comprehensive coverage and the punishment factor. But I signed up for the program out of the idealistic belief that the more you use a gasoline-powered car, the more you should pay for that privilege. I also believe in toll highways and bridges--you use them, you pay for them.
There's one thing I can attest to: I lived in New Orleans from the age of 49 to 56, and anyone who tells me that I was a less safe driver because I drove an average of 40 miles per week instead of 40 miles per day is wrong. Driving safety does not increase with miles driven per week, it increases with awareness about things like defensive driving. And I will venture that people who operate with an awareness that reducing driving has benefits that go beyond their own little worlds bring that same awareness into their driving habits.
Lindy
Posted Thu, Aug 26, 9:36 a.m. Inappropriate
Why don't we just cut to the chase and outlaw private automobile travel in the Puget Sound region? We could allow an exception for tribes and government workers. Think of the environmental benefits!
Posted Fri, Aug 27, 11:19 a.m. Inappropriate
BlueLight and dbreneman seem to think that charging consumers for using more of something is a bad idea. It's a simple concept, one that conservatives used to understand, but apparently have forgotten. If someone drives more, they're statistically more likely to get in an accident. So why shouldn't they pay more for insurance? Right now their insurance rates are subsidized by people who don't drive that much. It's far past time to end that gravy train.
Posted Fri, Aug 27, 2:12 p.m. Inappropriate
"seanp" writes: "If someone drives more, they're statistically more likely to get in an accident. So why shouldn't they pay more for insurance? Right now their insurance rates are subsidized by people who don't drive that much."
That's simply not true. Insurance companies do penalize drivers with longer commutes. They always have and they always will. What they do not do is charge for auto insurance by the mile. If that was sound actuarially, they'd have been doing it for decades, but it's not so they don't. This proposal is simply social engineering; another way to make life miserable for people whose life choices the "enlightened" class does not approve of.
It may make people who happen to live in a place convenient to transit, and happen to work hours convenient to transit at a job that happens to be located convenient to transit feel smug and virtuous to demonize people who need cars, but such autophobia does not make society better, it only works to make many more people's lives worse. If I lived in such a transit-friendly place, I might find it fun to play this game, too; but I don't. Hundreds of thousands of people in the Puget Sound area need their cars to commute, and all of us are going to need cars for at least another generation or two because there is no alternative to transportation given the way this region is laid out. Sometime in the future, a different alternative may evolve, but for the foreseeable future, to force people out of their cars means you are forcing them out of their homes and jobs; and at that point, who's left to pay the bills for all the light rail?
Posted Fri, Aug 27, 5:13 p.m. Inappropriate
"BlueLight and dbreneman seem to think that charging consumers for using more of something is a bad idea. It's a simple concept, one that conservatives used to understand, but apparently have forgotten. If someone drives more, they're statistically more likely to get in an accident. So why shouldn't they pay more for insurance? Right now their insurance rates are subsidized by people who don't drive that much. It's far past time to end that gravy train."
Most states have high risk insurance pools for those with poor driving records so the rest of us don't have to subsidize them. Makes sense. Gee, lets apply that to health insurance. If you are overweight, smoke or have a history of chronic illness (heart disease, diabetes, asthma, etc.,) and therefore are "using more of something", like health care, you should pay more for it. How about higher deductibles, higher co-pays, etc. Oops, that's a no-no.
Posted Sat, Aug 28, 1:11 a.m. Inappropriate
What? Charge more for health insurance for people who allow their bodies to fall into rack and ruin? Makes way too much sense for it to ever happen here.
Posted Tue, Aug 31, 5:59 p.m. Inappropriate
I remember many years ago a plan to add insurance costs to the price of motor vehicle fuel -- so the more you burn the more insurance premium you pay. Very similar to pay-by-distance without the Big Brother intrusion involved in all the GPS monitoring.