pay-as-you-drive (payd)

One of my favorite things about The Raleigh Forum is that by 10am on Monday morning I already have a list of blog topics I need to write based on interesting, thought-provoking conversations we have here.

I off-handedly mentioned that I didn’t have any incentive to bike to work {I pay for monthly parking and my gas is approximately $1 per day}. I half-jokingly said that they should have “pay as you go” insurance plans in order to motivate drivers to drive less.

3 seconds later, I found this Wikipedia article on PAYD {pay as you drive}- also called usage-based- insurance plans!

According to the article, “The simplest form of usage based insurance bases the insurance costs simply on the number of miles driven. However, the general concept of pay as you drive includes any scheme where the insurance costs may depend not just on how much you drive but how, where, and when one drives.”

Arguments for these kinds of plans:

  • Provides a tangible incentive to drive less; environmentally beneficial
  • Extra costs go into place when the driver uses unsafe practices, like talking on the phone will driving. This is thought to encourage drivers to adopt more safe driving practices
  • Young drivers pay based on their own driving; do not have to pay {literally and figuratively} for the driving practices of their peers
  • GPS tracking provides safety for the driver and their vehicle in the event of an accident or theft

Some interesting arguments against the plans:

  • The insurance company could raise your premium based on where and when you park in certain locations. If you lived in a bad area, you could end up paying much more for insurance.
  • Using the GPS capabilities, the insurance company could see if you’re speeding and raise your rate accordingly. I wonder if this is necessarily a bad thing though?
  • GPS tracking is potentially an infringement on customers’ privacy
A really interesting side note: “The use of telematics to detect drunk driving and texting while driving has been proposed. A US patent application combining this technology with a usage based insurance product was open for public comment on peer to patent.”
Progressive Insurance offers a PAYD plan called Snapshot, but unfortunately it’s unavailable in North Carolina! Bummer…I would have been interested in testing it out!

What do you think? Would you opt-in to one of these plans? Do you use Snapshot? Any other benefits or repercussions that you see? 

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