 Strategy
Support a resolution to conduct a pilot program for mileage-based vehicle insurance rates in North Central Texas.
Pilot Programs
Implementation Area
North Central Texas Ozone Nonattainment Area
Foundation For Support
Incentive-based measures that impact behavior choices, such as pay-as-you-drive rates, which create a large incentive to reduce single occupant travel and therefore, pollution from vehicles; Texas House Bill 45.
Description
Mileage-based vehicle insurance programs permit drivers to pay their automobile premiums on a variable scale, dependent upon how much they drive each vehicle. In 2001, the Texas Legislature passed House Bill 45 that allowed Texas insurance companies to offer mileage-based automobile insurance. Current industry practice recognizes this concept, but on a very limited basis. This new initiative would permit customers to purchase insurance on a per mile basis, rather than a fixed annual premium. Since the cost of coverage is directly tied to use of the vehicles, Pay-as-You-Drive insurance is a strong incentive to drive less and pollute less. This strategy compliments current Regional Transportation Council (RTC) efforts to promote the concept of sustainable development throughout the region.
A two-step approach for conducting a Pay-As-You-Drive Insurance (PAYD) Pilot Program was devised from regional input and thorough research of literature and previous case studies of mileage-based insurance programs.
Phase 1: The first phase of the PAYD Pilot Program is an information-based evaluation utilizing existing data sources to determine the relationship between mileage driven and risk incurred. This approach will test the theory for the insurance industry that lower mileage translates into lower risk and therefore a reduction in claim costs. (2/06: View results here)
Phase 2: The second phase of the PAYD Pilot Program expands upon and is intended to validate the study conducted in the first phase, but also measures consumer response to a reduced premium incentive. The goal of the second phase of the program is to determine if a PAYD option will actually induce regional drivers to reduce their mileage and what effect this may have on air pollution emissions. Through an open Request For Proposals, the North Central Texas Council of Governments entered into a partnership with Progressive Casualty Insurance Company to offer a mileage-based pricing option to its customers and track the effect of the pricing on customer mileage. There was overwhelming response to requests for participation in the program in the North Texas region. Due to funding limits, participation was limited to the first 3,000 respondents. Data collection began in May 2006 and will conclude in May 2007. Results will be posted at the end of the pilot program.
Funding
The RTC will provide up to $1.5 million in federal funding for the Phase 2 of the PAYD Pilot Program. There was no procurement process in Phase 1 and no funds were authorized for insurance companies.
Timeframe
Phase 1: August 2005 - November 2005
Phase 2: May 2006 - July 2007
Updates
Phase 1 Analysis Results [PDF]
Phase 2 Mid Course Summary (April 2007) [PDF]
Phase 2 Final Report (July/August 2008) [COMING SOON]
EPA Air Innovations Presentation (8/25/05) [PDF]
Committee Presentations
Timeline of Events [PDF]
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