King County to resuscitate pay-as-you-go insurance model

A pilot pay-as-you-drive car insurance program launched in 2007 was a flop, registering only a handful of users. Now the county is seeking a new contractor for the project. Will the second time be the charm?

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A pilot pay-as-you-drive car insurance program launched in 2007 was a flop, registering only a handful of users. Now the county is seeking a new contractor for the project. Will the second time be the charm?

After a planned “pay as you drive” (PAYD) auto insurance pilot program was announced with fanfare by King County in 2007, it quietly fizzled by mid-2011 as a related contract with Unigard Insurance’s Bellevue office was cancelled. But now the County is hoping to ramp up the experiment — which is slated to use on-board devices to track mileage and facilitate rate discounts — once more. Perhaps lending impetus to stalled state legislation, which would authorize insurers to offer a PAYD option to Washington motorists.

With a $1.9 million grant from the Federal Highway Administration still in hand, King County is now seeking proposals from insurance companies to develop a PAYD product, also known as mileage based auto insurance (MBAI). The program would be marketed to drivers as a way to save money, reduce vehicle miles traveled, and — in urban regions such as Seattle — cut greenhouse gas emissions from vehicles.

A 2007 announcement by then-King County Executive Ron Sims heralded the joint county-state pilot project with Unigard, and said it aimed to include 5,000 drivers statewide as enrollees. However, a compendium of reports to the County from the contractor between late 2009 and mid-2011 illustrate a very different reality. The number of vehicles enrolled in the program peaked at 13 and had dwindled to six by June, 2011. According to the contractor reports, an initial “pre-test” group of 100 enrollees had been sought, with 1,100 ultimately planned to have been enrolled and participating.

The County’s contract with Unigard started in August 2009 and was to have continued through May 2014 at a cost of up to $1.7 million. But the project was cancelled in July, 2011 after just $16,729.71 had been spent.

According to the reports submitted by Unigard to the county, marketing challenges included too small a discount for lower mileage, which — at 5 percent with a possibility of rising to 15 percent — may not have been enough. One snapshot: 123 sales leads, generated through referrals from the website of the Seattle-based Sightline Institute and the Cascade Bicycle Club over two months, resulted in the sale of only seven policies. Although the conversion rate was not out of the ordinary, an informal survey of those who declined indicated that “prospective customers will not switch merely to support the environmental aspects” of the program; “prospects only switch if their immediate insurance costs are lowered.”

As the pilot project slowed to a halt, a report from Unigard to the County in April, 2011 recommended that next steps be to get more participants and “momentum.”

The county’s current Request For Proposal (RFP) seeks an insurance carrier who will roll out a three-year pilot program by October 2012. The desired program would offer one or more MBIA products — likely designed to use existing GPS technology, which automatically records number of miles traveled. The work also entails related marketing efforts, state regulatory approvals, training of agents, and comprehensive evaluation and regular reporting to the county on the project’s progress.

The request also emphasizes the potential ties between MBAI marketing and increased transit usage. "MBAI is a viable strategy to reduce vehicle trips…The consumer can choose to reduce one of the highest costs of driving by reducing trips, particularly commute trips, by taking the bus or vanpool. We are quite interested in the cross-marketing potential of MBAI to help build transit ridership … an appropriate incentive might be a pre-loaded ORCA (transit fare) card…”

King County Metro, the cities of Seattle, Bellevue, and Redmond, and non-profit partners are all poised to help market MBAI products, according to the RFP. The new MBAI contract is to be awarded by King County on December 5.

According to a U.S. Census Bureau/U.S. Commerce Department survey of commuters aged 16 and older, 8 percent of 2008 respondents in King and Pierce counties (“Seattle-Tacoma-Bellevue” in the study) said they’d taken public transportation to get to work in the last week, versus 8.7 percent in 2009. Transit usage is much higher in Seattle itself, accounting for some 40 percent or more of daily work trips. 

This post originally appeared on the Public Data Ferret.


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