Pay-As-You-Drive Car Insurance
The cost of car insurance can be a major barrier to driving. And we know that people with access to a reliable, affordable car are more likely to be employed, earn more, and work more hours. We also know that low-wage workers drive fewer miles than higher income people, which makes transportation to work a regressive tax on employment. (For much information more on transportation and work, see our resource page on transportation and the labor market.)
Recently, we've been monitoring efforts in a couple states to reduce the cost of car insurance and we found this new article about pay-as-you-drive car insurance in the popular journal Democracy intriguing.
Pay-As-You-Drive Car Insurance
by Jason BordoffIf you're like most Americans, you eat too much at all-you-can-eat buffets. With auto insurance, it's no different. Drivers who are similar in all respects—age, gender, driving record—pay roughly the same premiums whether they drive 5,000 or 50,000 miles per year, even though the likelihood of a collision increases with each mile. This "all-you-can-drive" pricing scheme imposes significant costs on society: more traffic accidents, congestion, air pollution, greenhouse gas emissions, and dependence on oil. It's also inequitable, as low-mileage drivers, particularly low-income people and women, subsidize high-mileage drivers.