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Ideal Policy of Pay as You Drive

Given the state of today’s economy, and, thus, the gas prices, drivers are finding it tougher to be able to afford insurance as well as the car that it covers. Many attempt to save fuel and money by carpooling and using the bus system, but nothing reduces the cost of their insurance. So, to reward those who are trying to reduce car usage and fuel consumption, many companies are developing a new program called PAYD auto insurance.

With Pay as You Drive (PAYD), people who drive less and buy less fuel will be rewarded with cheaper insurance rates. This type of auto insurance allows you to pay for your insurance simply based on how many miles you drive. That is the most basic aspect of the program because, of course, there are other details involved. But this type of insurance is ideal for lower income drivers, as they have more control over how much is paid for premiums and their insurance as a whole. Having this insurance will significantly reduce pollution, and auto accidents will decrease by at least 17% if people reduce their driving by 10%.

Insurance providers track the number of miles you drive by installing a custom odometer that reports back to the company at regular intervals how many miles you have driven. As such, there is little possibility of fixing the odometer so that a person appears to be driving less than he actually is.

The PAYD program is still in development, as no insurance company has announced its future usage. However, OnStar has paired with an insurance company in a few select states to be able to offer discounts for those who drive only a maximum of 15,000 miles per year. Yet another program, in development in Minnesota, offers coverage similar to PAYD by promising to provide cheaper insurance to those who own a 1996 model or older and do not drive very often. A device would be installed into the vehicle’s ODBII (onboard diagnostics port) and would record information on the vehicle’s usage.