Pay-As-You-Drive Legislation is a Win-Win

Jason Bordoff, The Brookings Institution
Pascal Noel, The Brookings Institution

Abstract

In these tough economic times, consumers are looking everywhere for places to pinch pennies.

To save on gasoline, for example, drivers reduced miles traveled by 4 percent in 2008 compared to a year earlier. But drivers could have saved even more: they still had to pay the same amount for auto insurance, even though the likelihood of being involved in an accident decreased as they drove fewer miles.

A bill just introduced in the Washington State Senate would fix that disparity by encouraging firms to price auto insurance based on miles driven rather than in a lump sum amount per year. The idea is called “pay-as-you-drive” auto insurance.