Pay-As-You-Drive Pricing For Insurance Affordability

This paper describes how Pay-As-You-Drive (PAYD) pricing can increase vehicle insurance affordability. With conventional pricing, motorists pay a fixed premium for unlimited mileage coverage. PAYD charges premiums by the vehicle-mile, so a lowerrisk driver pays 2-4¢ per mile and a higher-risk driver pays 10-20¢ per mile. This lets motorists save money by reducing their mileage, and tends to benefit lower-income motorists. Pay-As-You-Drive can be a consumer option, so motorists select the rate structure they prefer.