Dean Baker: If Environmentalists Cared About Global Warming.....

[marmar]

from Truthout:


If Environmentalists Cared About Global Warming ...
By Dean Baker
t r u t h o u t | Columnist

Monday 29 January 2007

They would all be pushing for pay as you drive auto insurance. I know that insurance isn't very cool or sexy, like some of the high-tech solutions for global warming. But pay as you drive insurance has the great advantage of being something that could in principle have a big impact beginning tomorrow, and it does not face massive political opposition. There is nothing else that comes close in terms of its potential impact on a short-term basis.

Just to restate the basics, currently people treat auto insurance as a fixed cost of driving. They pay pretty much the same for their insurance regardless of whether they drive 1000 miles or 20,000 miles. The cost of insurance simply is not a factor in the decision on how much to drive. If the cost of insurance were instead assessed on a per mile basis, it would on average come to about 9 cents a mile. This would provide the same disincentive to drive as a $1.80 a gallon gas tax for someone with a car that gets 20 miles per gallon.

There is no major technical or political obstacle to switching to pay by the mile insurance. Insurers could continue to assess different rates based on drivers' accident history and other relevant factors. A mother with a perfect driving record may pay 5 cents a mile for her insurance, while a wreck prone teenager may pay 20 cents a mile. There will be problems with verification, but everyone is not exactly honest at present in dealing with their insurance companies. Verification problems can be overcome, or at least contained.

The insurance companies won't want to switch from their current pricing system, but this is mainly just a problem of inertia. Companies that are profitable don't want to be pushed to change their practices. However, this is not a case like the tobacco industry, where keeping people from getting cancer means shutting them down. There is no reason that insurers can't make every bit as much money with pay as you drive policies as they do on the current system. Furthermore, insurers don't have to be forced to switch. Most of the transition can be accomplished with modest incentives (e.g. $100 a year subsidy for pay as you drive policies).

It is important to realize how much is at stake on this. According to a recent study, switching to pay as drive policies would reduce driving by approximately 9 percent. This is a really big deal.

To see how important a 9 percent reduction in miles driven would be, let's contrast it with a very optimistic political scenario, in which our political leaders begin to take global warming seriously. Suppose that a president is elected in 2008 who actually commits themselves to doing something about global warming. A strong measure might require a 50 percent increase in average fuel efficiency over a 5-year period. If such a measure passed in 2009, it would mean that the cars sold in 2014 would consume an average of 33 percent less gas than cars on the road today. .....(more)

The rest of the piece is at: http://www.truthout.org/docs_2006/012907H.shtml

[kestrel91316]

1. Funny. My insurance charges more, the more I report driving.

It's on the honor system, however.