Car insurance is a necessary component of legal driving, but it's often quite expensive. And to those who don't drive often or very far, the cost can be daunting. Enter... Pay As You Drive (PAYD) Insurance.

Most people don't consider vehicle insurance to be a significant portion of a vehicle's total cost, but the fact is, the average driver spends almost as much on insurance as he or she does on fuel. Insurance is considered a fixed cost, and reducing your mileage does not mean a reduction in the cost of your insurance. However, this could be changing.

Studies in the U.S. show that if auto insurance were priced by the mile, drivers would likely reduce their mileage by as much as 20%. Because automobiles are the single largest contributor to greenhouse gas emissions, Pay As You Drive could mean a significant reduction in emissions.

PAYD also recognizes that the more miles you drive, the more likely you are to have an accident (annual insurance claims increase with annual vehicle mileage). With PAYD, insurance premiums would be based on miles driven rather than the make and model of a car.

  • For consumers: Access to more affordable insurance and more control over insurance costs.
  • For society: Initial research estimates that pricing insurance by the mile could cut total driving by 5 to 15 percent, which would decrease the huge environmental impacts of the automobile and lessen the number of crashes and claims. A 10 percent reduction in driving is estimated to result in a 17 percent reduction in crashes.
  • For taxpayers: Reduced driving would also save money spent on roadwork.Oregon Environmental Council, a nonprofit group working to pilot PAYD in Oregon, estimates that PAYD insurance could trim the state's road-related costs substantially over the next 20 years.
  • For insurers: An insurer offering PAYD insurance may see an increased market share and a growing reputation as an innovative, customer-oriented, and socially responsible company – and may also have fewer claims.
Related Articles and Information

World Changing: Pay-Per-Mile Car Insurance: It's Coming, Jeremy Faludi, Jan 05 2006
Grist Magazine: Driving a Hard Bargain, Elisa Murray, 03 Nov 2003
Portland Tribune: 'Pay as you drive' Policies Get Boost, Ben Jacklet, 10 Jan 2003
The UK Observer: Pay as you drive to slash insurance bill, Andrew Bibby, 03 Nov 2002
Better World Club Testifies Before the Oregon House Transportation Committee in Favor of PAYD Insurance, Mitchell Rofsky, 2001 Apr 18
Pay As You Drive Definition
Cents per Mile Now: A project of the National Organization for Women (NOW), Washington, DC, and Texas NOW
Wikipedia: Usage-based Insurance: Includes information on pay-as-you-drive like products available in the US and around the world.

The Environmental Protection Agency is developing a voluntary government-industry partnership to offer recognition and support to insurance companies who offer Pay As You Drive.


1% Donated to the Environment
1% Donated to the Environment