DISTANCE-BASED VEHICLE INSURANCE AS A TDM STRATEGY

Vehicle insurance is generally considered a fixed cost with respect to vehicle use. Motorists do not usually perceive insurance cost savings when they reduce mileage. Distance-based insurance pricing converts insurance to a variable cost with respect to vehicle travel so premiums are directly related to annual mileage. Distance-based pricing makes vehicle insurance more actuarially accurate (premiums better reflect the claim costs of each vehicle) and gives motorists a new opportunity to save money when they reduce their mileage. It can help achieve several public policy objectives including equity, road safety, consumer savings and choice, congestion reduction, facility cost savings, energy savings and environmental protection. This paper compares several distance-based insurance pricing options, and evaluates concerns and criticisms. The analysis indicates that distance-based pricing is technically and economically feasible, and can provide significant benefits to motorists and society.