The Non-Development of Pay As You Go Plans

As seen at the Oregonian:

Pay-as-you-drive automobile insurance, a concept permitting motorists to buy coverage on a per-mile basis, is attracting attention as one answer to soaring gasoline prices and worsening traffic gridlock.

With pay-as-you-drive, insurance factors such as driving history, vehicle type and geographic location are incorporated into the per-mile price, which generally ranges between 2 and 10 cents. Mileage readings are captured through sensors in cars or authorized odometer readings.[...]

But the insurance industry has been largely skeptical. Texas in 2001 passed the first law to formally allow insurers to offer pay-as-you-drive insurance, but no companies have responded.

“What insurers are doing is continuing to use systems that they know work,” said Rick Gentry, executive director of the Insurance Council of Texas, a trade association of insurers writing business in the state. “If insurers figured out a more efficient, less risky way to offer insurance, they would have jumped on it.”

The last sentence says it all, I think. It’s true that the industry is sometimes slow to accept changes in paradigms, particularly when it relies on data not currently captured, but considering the expenses and limited margin involved, I suspect that if it were possible to do this more efficiently than current traditional rating/underwriting, it would already be being done.