Friday, April 18, 2008

C'mon and take a free ride...

Here is an interesting idea: pay as you drive auto insurance. You install a device in your car that communicates to your insurance company how much you drive and how you drive (too fast, sudden braking, etc.) and your rates are charged according to the type of driving you do. Insurance is based on risk pooling, and this would allow drivers to pay based on a more accurate assessment of their actual risk.

This type of pricing may also reduce some externalities associated with excessive driving: accidents, carbon emissions, traffic congestion, etc. It will be interesting to see how receptive the public is to such a concept. This may revolutionize auto insurance. Or not.

3 comments:

Anonymous said...

If the driver's speed is compared with the actual speed limit they drive through, this might not work.

Speed limits are not realistic. I'd argue that people who drive under the ridiculously low speed (upper) LIMITs shouldn't be driving because they are a hazard in addition to screetchingly afraid and unpredictable.

I'd also like to add that whomever is in charge of setting up red lights should get an Operational Research engineering degree; crazy, stopping every block only to watch the next light turning red as yours turns green in this state.

Anonymous said...

Regarding above: I just got home from Columbia, can you tell?

jessienewburn said...

Love it. Thanks again, FM, for opening up my mind to new perspectives.