While other insurance companies belittle those who can’t or don’t drive, another — Progressive — is living up to its name by being the first major US insurer to offer a "Pay As You Drive" policy, allowing customers who drive less to pay less for coverage.

As explained in a New York Times "Freakonomics" article on the negative externalities of driving, Progressive will offer "MyRate" PAYD plans in six states.

Drivers who sign up for MyRate will install a small wireless device in
their cars that transmits to Progressive not just how many miles they
drive but also when those miles are driven and, to some extent, how they
are driven: the device measures the car’s speed every second, from
which Progressive can derive acceleration and braking behavior. Which
means that Progressive will not only be able to charge drivers for the
actual miles they consume but will also better assess the true risk of
each driver.

The Freakonomics guys believe that PAYD insurance may be the most practical and likely means to curtail driving in the US, where other methods, like congestion pricing and gasoline taxes, are politically unpopular — even though congestion, carbon emissions and car crashes cost Americans more than $300 billion per year, according to studies cited in the article. 

Regardless of its societal benefits, as a private sector initiative PAYD is undoubtedly a risky move for the first company to try it.

But if Progressive’s PAYD insurance can induce some of its
high-mileage customers to drive less and especially to drive more
safely, resulting in smaller claims payouts for Progressive and fewer
negative externalities for everyone, then it could truly be a
win-win-win situation.

Except, perhaps, for Progressive’s rivals.

Photo: ASurroca/Flickr