Los Angeles, California – California has approved the state’s first pay-as-you-drive (PAYD) insurance, with Massachusetts and New York City officials also considering the initiative, according to Online Auto Insurance. The programs have the potential to reduce traffic and carbon emissions by encouraging motorists to drive less.
In PAYD programs, insurers obtain mileage readings from their policyholders, rather than estimates of miles travelled in a year, and give discounts if the mileage is kept below certain thresholds. Online Auto Insurance said that when insurance companies offer discounts, consumers will respond by keeping their total miles driven to a minimum, while insurance companies consider low-mileage motorists to be a relatively low risk.
In its PAYD pilot program proposal, the Massachusetts Department of Energy and Environmental Affairs estimated that a statewide PAYD system could result in a two to 9.5 per cent reduction in vehicle miles travelled, depending on the particulars.