On Public Radio International’s “The World,” today, there was a report that insurance companies are looking at creating products based on various aspects of environmental risk. One risk being evaluated for potential profit is global warming based on carbon emissions. One of the leading causes of these emissions, of course, is transportation by private vehicle.

The current American auto insurance policy is based on various factors: past driving history, type of automobile, even credit ratings. Few policies are evaluated based on how far one drives in a particular year. Whether you drive 1,000 miles, 10,000 miles, or 50,000 miles, typically you will pay the same rate for your auto insurance policy. While the companies do keep general tabs on how much one drives, this is mostly for determining the value of the vehicle vis-a-vis the comprehensive and collision coverage carried.

Evolving theory in the insurance industry appears headed in a direction that may alter the way policies are built to include some component for distance traveled in a year. The thought is that this could provide some market-based incentive for people to get out of their cars and onto public transit.

As if $4-a-gallon gas isn’t enough to do that already!

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2 Responses to Pay-as-you-Drive? Insurance to Improve the Environment…

  1. Ryan Sharp says:

    The more market-based incentives to reduce our VMT, the better. After all, $4/gallon is pretty weak compared to $7.80/gallon in London or Paris.

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  2. Information I really appreciate it!!

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