Costs and Benefits of Varying Per-Mile Insurance Premiums Based on Measured Risks Specific to Each Mile Driven

Much has been written about the potential public policy and consumer benefits of pay-as-you-drive-and-you-save (PAYDAYS) insurance, but without acknowledging that the way that PAYDAYS insurance is offered will affect the level of such benefits. Further, actuarial accuracy, consumer acceptance, and the cost of offering PAYDAYS insurance are all affected by how such insurance may be offered. Within the insurance industry, there is substantial ongoing research and experimentation related to identifying the usage-based data that is relevant to driving risk, practical and affordable to collect, and acceptable to consumers to use. The purpose of this paper is to help bring about a better understanding of the costs and benefits of different approaches to offering PAYDAYS insurance. The research discusses the value of using mileage or minutes of travel as an actuarially preferable charging unit to calendar year, and also the added benefits, from the standpoint of further improving actuarial accuracy and also in advancing public policy objectives such as reducing crashes and air pollution, of charging risk-adjusted mileage premiums. The costs of implementing systems to charge risk-adjusted mileage premiums and the consumer acceptance challenges related to tracking driver behavior for such charges are also discussed. As technologies that facilitate tracking become standard in more vehicles or continue to come down in price, and as the relationship between driving factors that may be tracked and claims costs become more apparent in new studies, it is expected that the market will move more toward PAYDAYS premiums with risk-adjusted mileage pricing.

• Corporate Authors:

  Transportation Research Board

  500 Fifth Street, NW
  Washington, DC  United States  20001
• Authors:
  • Greenberg, Allen
• Conference:
  • Transportation Research Board 88th Annual Meeting
  • Location: Washington DC, United States
  • Date: 2009-1-11 to 2009-1-15
• Date: 2009

Language

• English

Media Info

• Media Type: DVD
• Features: References;
• Pagination: 18p
• Monograph Title: TRB 88th Annual Meeting Compendium of Papers DVD

Subject/Index Terms

• TRT Terms: Air pollution; Automatic tracking; Automobile drivers; Automobile insurance; Benefit cost analysis; Costs; Economic benefits; Risk assessment; Traffic crashes; Vehicle miles of travel
• Uncontrolled Terms: Pay as you drive
• Subject Areas: Economics; Highways; Operations and Traffic Management; Policy; I10: Economics and Administration;

Filing Info

• Accession Number: 01125267
• Record Type: Publication
• Report/Paper Numbers: 09-3779
• Files: TRIS, TRB
• Created Date: Mar 30 2009 7:18AM