Sebastian Mallaby wrote up one of my favorite ideas, namely pay-as-you-drive car insurance. But strangely he doesn’t attribute the idea to Barry Nalebuff, who devised a related and ingenious idea in his excellent book Why Not?, or Aaron Edlin, who crunched the numbers in an excellent piece that appeared in The Economist’s Voice in 2006. Harper’s floated the proposal in 2006. There is also a pretty decent Wikipedia entry on the subject.
So the proposal Mallaby describes isn’t exactly new. It’s important, definitely, and it should be encouraged. But I wish Mallaby would give credit where it’s due. The piece he cites calls upon states to enact model legislation. Oregon embraced this policy in 2005. Ted Boettner wrote an information-packed post on other PAYD efforts early last year.
Over the past few years, Texas, Oregon, Minnesota, and California have started promoting PAYD insurance as an option for consumers. The state of Oregon offers a $200 per year tax credit for each PAYD insurance policy and West Virginia could do the same. In Minnesota, Progressive Auto Insurance has been offering PAYD option to its customers.
Mallaby really ought to plug Progressive Auto Insurance, and encourage them to fight the good fight.