Would a ‘Pay-As-You-Drive’ insurance model work in B.C.?
Posted August 17, 2018 11:32 am.
This article is more than 5 years old.
VANCOUVER (NEWS 1130) – There are calls to overhaul ICBC’s rate structure to include a “Pay-As-You-Drive” insurance model. One group claims it would give drivers an incentive to reduce the time they spend on the road.
The model is also referred to as “distance-based” or “usage-based” insurance. Premiums are based on the distance a car covers in a year.
“The current insurance premiums are like an ‘all-you-can-eat restaurant’ pricing. Once you pay, there’s no reward for reducing your driving even though there’s solid research showing that when people reduce their mileage, they reduce their crash risk,” said Todd Litman with the Victoria Transport Policy Institute.
He added many people think this model leads to people in rural areas paying more.
“That’s not true at all. The per-kilometre rate incorporates all existing rating factors. So, a rural resident would pay much less per kilometre than somebody who lives in a high-risk area. Rural residents would only pay more if they drive more than average among rural residents.”
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According to Litman, more than half of all rural drivers would save money, arguing the model increases affordability by offering a new opportunity to save money — which in turn reduces their risk of being involved in a crash.
“As people reduce their mileage, they’re reducing crashes, traffic congestion, and air pollution.”
Litman believes this model makes the system more fair. “The current system over-charges motorists that drive less than average in their rating category and under-charges people who driver higher mileage.”
This pricing model is offered by private companies in other places, like the U.S., Europe, and Australia.
“We know it works. But ICBC has been very reluctant to try these kind of innovations,” Litman said.
“It’s a change in the way the insurance companies structure their rates, so it tends to be difficult for the insurance company. But it’s very beneficial to the insurance consumers.”
