Simple. Sensible. Pro-active.
The idea would solve more problems than it would create but It would involve (Gasp!) changing how insurance is done.
The insurance industry will likely oppose any shift, not because they can’t make profits on pay-by-the-mile policies, but rather because they don’t feel like changing what they are doing. But that doesn’t mean it’s impossible—in fact, Progressive Auto Insurance has been experimenting with pay-by-the-mile policies, and in southern California, AAA offers a graduated pay-by-the-mile policy that is somewhat like the one I’m proposing.Dean Baker doesn't look like someone from the lunatic fringe to me. Since the article appears in Harpers I can sense conservative backsides scrooching up already, but the proposal is emminently sensible. Snowballs? Where, you say?
Pay-by-the-mile insurance would have the greatest impact if it were implemented nationally, but since insurance is regulated at the state level, individual states could take action on their own. For example, states could offer a small incentive (a $200 per year tax credit, say) for each pay-by-the-mile insurance policy. Oregon began doing this last year. They are other ways to promote pay-by-the-mile policies, but in some cases states just have to remove obstacles to pay-by-the-mile insurance. State regulators must explicitly approve the type of insurance policies that insurers offer, and in many states current regulations would not even allow pay by the mile policies.
Pay-by-the-mile insurance can also be adjusted to preserve the existing risk-based system. A wreck-prone teenager may have to pay 20 cents per mile for insurance, while a middle-aged parent with a spotless record may pay 5 cents per mile.