Time To Redefine Insurance?

18 August 2004

There once was a small effort to promote pay-at-the-pump insurance for automobiles. The theory was that by adding the price of insurance to every gallon of gas, you’d wind up with a plan that was far easier to administer and truly matched the coverage to the amount of driving. There were many details. It never happened.

Now, we’ve got another notion about how car insurance might one day be priced and managed. They’re calling this one pay-as-you-drive.

Insurance is defined as, ”insurance protecting against all or part of an individual’s legal liability for damage done (as by his or her automobile) to the property of another.” It’s usually expected that a given form of coverage is priced based upon a specific risk or set of risks and the history of statistics and probabilities that describe various insured events.

A box in the trunk or under the hood doesn’t spread risk across a group or statistical population. Instead, each individual carries the risk. I dunno. This one could be a recipe for profiteering. One bout of road rage and next month’s premium sky rockets. Take a month-long vacation to Fiji and the premium goes to zero. I really dunno.

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