Pay-as-you-drive auto insurance: do you think this is a good idea?

Question

An alliance of insurance companies and environmentalists wants to bring a new kind of mileage-based auto insurance to California and charge motorists only for the number of miles actually driven.

Called pay as you drive, the option is available from a few insurers in 34 states ... as well as Canada, Japan and Europe.

One company, GMAC Insurance Group, says its customers -- whose mileage is tracked by General Motors Corp.'s OnStar system -- have reduced the premiums they pay by 13% to 54%....

The system could cut motoring costs, protect the environment and reduce traffic congestion, boosters say. Opponents, mainly privacy advocates, say they fear that insurance companies could begin tracking more than just a driver's mileage. High-mileage drivers could also see higher rates.

from the Los Angeles Times

http://www.latimes.com/news/science/environment/la-fi-carinsure15-2008jul15,0,6970018.story

Answer 1

I agree that this is just a publicity stunt.

They already give discounts for people who drive fewer miles

Gullible is as Gullible Does

Answer 2

this wouldn't be fair to people who have to drive certain amount of miles a day to work and back. Insurance companies will find anything to take your money.

Answer 3

it would probably work out good in one way ,for the people who don't drive much they would save a lot of money but it may raise prices for other people who drive a lot,I'm sure the insurance company's would find a way to adjust this to suit their needs not the actual needs of the customer,right now if that happened they would loose money,and they don't like to loose money,its a good idea though,if it could be fair to all people i would be in favor of it, good luck.

Answer 4

Ha Ha,, I know a guy that had 3 accidents in 2 months,, less than 900 miles driven and 3 accidents. How do you figure he's safer than someone who drove 10 thousand miles in 2 months with no accidents?

.. your funny.

I have a  relative who lives in a small town with a population of only about 300 people. closest neighbor is 6 miles away. the closest gas station is 32 miles away, closest grocery store is 37 miles away. Her children's school is over 40 miles away. between work and school and the grocery store she averages hundreds of miles every day. Her chances of having an accident with another car is almost non existent. The town has actually gone years at a time without any accidents. by contrast, someone who lives in a major city like LA who drives only 1 mile to work has about a thousand percent higher likelihood of being in an accident.

The only people who are going to be interested in a program like this would be people living in large populations centers where accidents rates and premium rates are high.

Anyone who thinks this is a viable plan has a gross misunderstanding of risk assessment.

It actually sounds more like a scheme of shifting the financial burden to safer drivers and to people who live in rural areas.

Yeah, Somebody's getting some free publicity here. It's a very dumb and bad idea.

Later

Answer 5

I think this is a fantastic idea.

This will lower rates for those people who only drive a few miles a day to and from work, and for those who have a long commute, they can just stick with traditional insurance.

This would also give people more of a motivation to not drive their cars as much, which in turn will reduce fuel consumption and possibly lower gas prices a bit, which will help our economy greatly.

I would buy it!

Answer 6

I think it is a FANTASTIC idea.  It would be much more fair to everyone.  You pay for exactly as much as you use.  The more you drive, the more likely you are to get in an accident, so the more you pay.  

I think most people would benefit financially from this.  Those that drive a LOT would not benefit, so they could choose the flat rate like the current system.

Answer 7

General Insurance Agent

I'm sorry but you and the linked Los Angeles Times article have totally misunderstood the entire matter. It is not "Pay as You Go. All Insurers already consider your annual estimated mileage. Most people estimate 13k to 20k or so miles a year as their average. So some of us underestimate and others over estimate on our insurance appplication. An insurer currently rarely ever requires you to verify your annual mileage.

Most people never even update the application they signed years ago when they first applied for insurance. In the end it all pretty much washes out in the claims presented to the company,

For those who currently overestimate their annual mileage, Knowing the actual miles driven can help them save some money.

With the guy featured in the article as an example, He probably originally had all three of his vehicles rated for regular use. Since he's only one guy and can't drive all three vehicles simultaneously, he can have one vehicle which is probably his daily driver rated fro  regular use, the other two vehicles can likely be rated as occassional use and/or recreational use easily resulting in the savings mentioned.

Anyone with multiple vehicles can do the same, Just talk to your agent about it.

The drivers at the highest risk for an accident and other claims are young drivers and drivers who live in concentrated population centers regardless of the miles driven. Not people who drive more miles.

This is not any exciting revolutionary new concept, in fact it's not anything new at all, it's not a new type of coverage or concept of coverage and it's not a pay by the mile system.

It is however, A good publicity stunt on the part of the named insurer and it's sister company.

Take Care.