Posted on 29 Dec 2010
The Bloomberg administration in New York City is considering "Pay As You Drive" insurance, auto coverage sold by the mile, in an effort to get more cars off the Big Apple's traffic-clogged streets.
With "Pay As You Drive" insurance, motorists agree to install a device in their cars that monitors their mileage and driving habits in order to set rates.
Such policies have been available around the country for a decade, but not in New York. Yesterday, the city's Department of Transportation put out a request seeking ideas on how to use "mileage-based insurance pricing signals to trigger change in driver behavior."
Under traditional insurance pricing, those who drive the least help subsidize higher-mileage drivers who are more likely to have accidents.
According to a 2008 study by the Brookings Institution, these incentives could reduce driving by as much as 8 percent, reduce emissions by 2 percent, oil consumption by 4 percent, and provide an average savings of $270 per car.
"A one-size-fits-all approach doesn't make a lot of sense when it comes to pricing insurance," Transportation Commissioner Janette Sadik-Khan told The Post. "Paying based only on how much you drive is a potentially innovative way to make it less expensive for New Yorkers to get around."
Sadik-Khan would not say what the agency's plans are, but according to DOT documents, the goals are to help make the policies available and market them to New Yorkers.
Earlier this month, Progressive became the first insurance company to receive approval from state regulators to offer usage-based coverage.
With its Snapshot plan, Progressive customers agree to have their driving habits monitored for six months for such variables as acceleration, hard braking, mileage and time of driving, said Richard Hutchinson, Progressive's general manager.
With the chance to save as much as 30 percent on their policies, and zero risk of a rate hike, "people have an incentive to consume less and adjust their driving," he said.
Although it isn't yet available in New York, GMAC offers a pay-as-you-go option around the country utilizing its OnStar system.
"You must have under 15,000 miles a year, which is 288 miles a week, in order to qualify for their plan," said Joel Ohman a certified financial planner. "GMAC's discounts go as low as 54 percent off your total bill if you drive less than 5,000 miles annually."
Critics of the programs have expressed concerns about the invasion of privacy that comes with these monitoring devices, said Edmunds.com editor Philip Reed.
However, he noted, "this could be a money-saver for many people who don't drive a lot."
There are no explicit regulations against the policies in New York, but they each require state approval, insurance officials said.
Most efforts to keep people out of their cars entail high fees, tolls and taxes. One difference with the "pay as you go" schemes is that a reduction in driving is achieved by saving people money.