Articles From Experts
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Lets say for some reason you have not driven your car for few weeks. You have saved on gasoline but how about on insurance? Well if your living in Texas you are in for luck, because this is exactly what the law in Texas seems to be doing. But as expected the insurance companies are fighting it all the way. First lets see what this law has in store. "Pay-as-you-drive (PAYD)" or Cents-per-mile auto insurance: it works like this. An insurance company assigns your car to one of its rate groups according to your zip code, car use and type, driver type, and other information about your household the company obtains. Your car might be put into a group paying $400 a year. If the company determined that the average for cars in your group was 10,000 miles a year, the alternative mile rate for your group would be 4.0 cents a mile. If you chose the mile rate instead of the annual rate, you might initially buy 2,500 miles for $100 (= 4.0˘/mi. x 2,500 mi.), plus a nominal expense fee. These miles would be added to your car’s current odometer reading. Before these miles were all driven, you would have to buy more miles to stay legally insured. That means you buy as many miles of insurance protection as you need when you need them. This could save on anyone needing to economize on driving cost both on gasoline and insurance, which otherwise they would have to give up the car or drive uninsured. But as already said the insurance companies are fighting this all the way by saying that, they fear unlawful odometer tampering. Okay for argument sake if this is accepted, is this, the sole reason. NO. They are more bothered about the loss of credibility because cents-per-mile prices would reveal their controversial price categories by zip codes, credit scores, and driver sex to have no statistical validity on a per-mile basis. What do economists say? - In Consumer Economic Conditions in America, Thomas Garden writes: "Although forty-eight states make automobile insurance mandatory, tens of millions of cars still go uninsured. Why? Because today's pay-per-car insurance system charges the highest prices for cars whose owners reside in low-income neighborhoods where many people, by necessity, must economize by piling more miles on fewer cars. Insurance companies defend the high prices by defaming these people and labeling them 'high-risk' drivers. The reality is that the low-income high-risk driver is not a driver at all. It is simply a car that drivers are sharing in order to economize on insurance."With cents per mile choice, low-income drivers could keep the cars they need and keep them legally insured." So know what can you do? Tell your state legislators. Learn more about mile-rate choice, and tell your friends. Get a Cents-Per-Mile bumper sticker and put it on your car. Complain to newspapers and talk shows about your insurance company's using your car as extra profit without such a program as cent-per-mile auto insurance
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