Saturday, August 19, 2006

Cost Of Driving, Part I

Daryl brought this article on per-mile car insurance to my attention (with thanks to 3 Quarks Daily). It's something I have written about before (pre-blog). Dean Baker thinks we could cut gasoline consumption 10% just by switching to mileage-based car insurance. I think he is understating the case, as well as missing some major ancillary benefits.

If you're a typical driver, you pay about 10 cents per-mile in car insurance, which is comparable to what you pay for gasoline. (If you are driving a guzzler, you probably pay a bit more for both.) But unlike fuel expenses, you do not save anything on insurance when you drive less. Having your spouse pick up some groceries on the way home, instead of driving 10 miles round-trip, will save you a dollar in gas, but it won't save you a dime in insurance. If we switched to per-mile insurance, then you would save a dollar on gas and another dollar on insurance. Put another way, per-mile insurance would have about the same effect on average driving habits as an additional $3/gal. gas tax.

Six dollars per gallon wouldn't be enough to get you to cut down on driving? How about $18? While the average driver pays 10 cents per mile for auto insurance, bad drivers pay 50 cents or more--about $500 per month--or the equivalent of a $15/gal gas tax. That's based on a conversation I had with some insurers a few years ago (coincidentally while van-pooling with them); I assume it's even more today. In our car-crazy country, even bad drivers, with multiple tickets and accidents on their records, still need to drive. So they bite the bullet, pay their $500/month, and drive as much as they ever did. If per-mile insurance would get an average driver to cut down 10%, it should get the klutzes and idiots to cut down 20% or more.

And it's not just the klutzes and idiots; it's the teenagers! Or is that redundant? (Sorry, Sheen.) My insurance was actually averaging much less than $.10/mile, until recently. Then my daughter got her license. For some crazy reason, the insurance company assumes that now that she's discovered the joy of combustion, she's going to be driving--a lot. So they averaged her anticipated driving in with my known driving, and boy did my rates go up! But if we were paying by the mile, then her car would be metered separately. And she would not drive as much, because she could not afford to.

Getting the most dangerous drivers to drive less reduces the risk and the insurance cost for everyone. So not only would you most likely be driving less, you would be paying less for the miles you do drive--in addition to being safer, breathing cleaner air and facing less traffic. Oh, and one more thing: you'd be paying less for gas. It's estimated that if America cut its consumption by just 3%, the price of gas would drop $1/gal. Need a platform, anyone?


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