A read a great article today by Jason Bordoff about a new model for car insurance which would see the cost of car insurance link to the amount of miles (or kilometers) the owner drives in the year.

Here’s an extract of his article:

Drivers who are similar in all respects – age, gender, driving record – pay roughly the same premiums whether they drive 5,000 or 50,000 miles per year, even though the likelihood of a collision increases with each mile. This “all you can drive” pricing scheme is inequitable, as low-mileage drivers, particularly low-income people and women, subsidize high-mileage drivers.

A better approach is simple and obvious: pay-as-you-drive (PAYD) auto insurance. With insurance costs that vary with miles driven, people would have an incentive to drive less, thus decreasing the harm that more miles have on society – from greenhouse gas emissions to wear and tear on our roads. Under this system, higher-risk drivers – for example, the 25-year-old with a sports car and a DWI record – would still pay more per mile than lower-risk drivers.

What a great idea which should see most people premium reduced and use todays technology to assess risk more fairly.

To read more, visit the website: http://www.dallasnews.com