CLF and a diverse group of transportation and environmental organizations recently unveiled a proposed performance standard to rate Pay-As-You-Drive (PAYD) auto insurance policies in the U.S., which save consumers money when they reduce their vehicle travel.
Priced on the amount a vehicle is driven during the policy term, PAYD has the potential to save consumers an average $270 per vehicle insured, according to a 2008 report by The Brookings Institution. If deployed in all 50 states, PAYD could also achieve a 4% reduction in total U.S. greenhouse gas emissions, which contribute to global climate change. Transportation emissions currently account for nearly one-third of total U.S. greenhouse gas emissions.
A dozen states identify PAYD as an effective strategy for reducing greenhouse gas emissions, with Arizona, Colorado, Maryland, Maine, Minnesota, New Hampshire, New Mexico, North Carolina, Pennsylvania, Rhode Island, Virginia and Vermont all including it in their state climate action plans.
Despite PAYD’s promise, only a handful of insurance companies in the U.S. offer self-described PAYD products and some of these policies provide minimal incentives to reduce mileage. Moreover, there is no metric for judging the effectiveness of an auto insurance product in reducing vehicle miles traveled and related emissions.
Developed by CLF and a coalition of organizations with extensive experience in auto insurance, the proposed PAYD rating system offers three levels of certification for insurance products, Gold, Silver and Bronze, based on how well they allow consumers to save money by driving less.
PAYD offers significant social benefits and, unlike gasoline taxes and many other schemes for reducing driving, PAYD presents an opportunity for the majority of consumers to save.
“Pay-As-You-Drive auto insurance is common sense for consumers and the environment,” added Conservation Law Foundation President John Kassel. “PAYD will help America reach the emissions reduction goals set out by the Obama Administration. Importantly, it will also save money, make auto insurance more transparent and increase equity for consumers.”
Endorsers of the proposed standard include Environmental Insurance Agency, the Conservation Law Foundation, Ceres, Natural Resources Defense Council, Environmental Defense, the Institute for Transportation & Development Policy, CALSTART, and the Victoria Transport Policy Institute.