Lack of transparency in use-based insurance may undercut demand management benefits

One policy tool that holds promise in the effort to manage transportation demand is mileage-based insurance, also known as pay-as-you-drive insurance. Most motorists today pay premiums that are essentially fixed costs, with little or no connection to the amount of travel consumed. Evidence suggests that if insurance were more like motor fuel, with a direct connection to use, the price signal would encourage more efficient travel.

Lack of transparency in use-based insurance may undercut demand management benefits

One policy tool that holds promise in the effort to manage transportation demand is mileage-based insurance, also known as pay-as-you-drive insurance. Most motorists today pay premiums that are essentially fixed costs, with little or no connection to the amount of travel consumed. Evidence suggests that if insurance were more like motor fuel, with a direct connection to use, the price signal would encourage more efficient travel.

Road Usage Charge Pilot Program Preliminary Findings (Oregon DOT, 2013)

The objective of the Road Usage Charge Pilot Program is to demonstrate several choices for measuring and paying a road usage charge that are easy for motorists to perform while maintaining an efficient collection system administered by multiple interoperable providers, including ODOT and private sector entities.

Report on Impacts of Road Usage Charges in Rural, Urban and Mixed Counties (Oregon DOT, 2013)

This report represents the study of impacts of road usage charges in rural, urban, and mixed counties in Oregon. Despite perceptions that a road usage charge is unfair to rural residents, the data collected and analyzed for this study reveal that rural residents, on average, will not be affected in any significant way by a road usage charge—financially, behaviorally, or technologically.

Instant rewards, penalties, and feedback are shown to change driver behavior

A new study shows that tiny financial losses can improve motorists’ compliance with speed limits. The study’s researchers found that the psychology of losing money, even just a few pennies, as well as the instant feedback of seeing the money trickling away, almost completely eliminated speeding. Hybrid drivers often experience the same instant feedback by watching their dashboard mileage monitor in real time. As drivers become more comfortable with continuous monitoring of vehicle operations and instant feedback on their own behavior, both safety and efficiency can be expected to improve.

Report of Minnesota’s Mileage-Based User Fee Policy Task Force (Humphrey School of Public Affairs, University of Minnesota, 2011)

Over a period of six months, the Task Force, appointed by Minnesota Department of Transportation Commissioner Tom Sorel, discussed and evaluated the overall MBUF concept and related issues, determined benefits and concerns, considered potential system …

PAYD

This acronym may become increasingly common as insurance companies and consumers try out Pay-As-You-Drive insurance. PAYD ties insurance pricing to the amount of driving. A recent study by the Pacific Institute for Climate Solutions looks …