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Idea #3: Make Car Insurance Green and Fair

A UBC team wants rates that help the environment without hurting the pocketbook.

By Rob Annandale 19 Dec 2007 | TheTyee.ca

Rob Annandale is on staff at The Tyee.

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Bright ideas for 2008.

[Editor's note: Rather than look back over the year that was, the Tyee is offering its readers a dozen New Ideas for the New Year. We'll publish a new one every weekday from now through Jan. 1. They're textbook cases of thinking outside the box, all of them from people trying to make B.C. a better place to live. Later in January we'll be asking you to suggest your own new ideas for 2008, and publish a selection.]

With transportation accounting for 40 per cent of air pollution province wide, the time has come for car insurance to move beyond simply promoting safe driving habits and to start rewarding good environmental behaviour, according to a UBC research team.

Enter the hybrid distance-based auto insurance rates (HDB rates for the purposes of this article). A made-in-B.C. solution, it combines two kinds of green insurance -- one based on mileage, the other on fuel efficiency -- while trying to avoid the pitfalls of either scheme taken on its own.

"It seems like a plan, as far as we can see, where nobody gets hurt and where we are incentivizing the right behaviour," according to physicist Lorne Whitehead who leads the UBC team along with planning expert Lawrence Frank.

Regular pay-as-you-drive rates involve higher fees for those who spend more time on the road. But that logic can end up hurting lower-income individuals unable to reduce their driving. For example, a single parent who ferries the kids around and commutes from the suburbs each day is bound to log a lot of highway miles and may be hard-pressed to pay any resulting financial penalties.

Likewise, insurance plans that nail those who drive gas-guzzling vehicles could punish a retired couple who drive their 30-year-old Cadillac once or twice a week.

'You will not pay more but you may pay less'

HDB rates would only pick on those doubly sinful drivers who travel great distances in an inefficient vehicle.

"If you drive a Hummer from Maple Ridge to Burnaby every day, you're going to pay a lot more money," Whitehead told the Tyee. "The nice thing about that is that's the only person who gets hurt. And that person has choices."

Whitehead doesn't want to impose anything on people and would leave in place the Insurance Corporation of B.C. (ICBC) formats that account for factors such as driving behaviour and geographical location. So for example, there could be allowances for rural drivers who may inevitably have to drive greater distances than their urban counterparts. And the rates would not apply to long-distance trucks transporting commercial goods.

"I think by far the most palatable way to proceed would be to make it available as an option," he said. "And I think you could probably introduce it as an option in a risk-free manner where you would say to people who signed up for this option, you will not pay more but you may pay less."

He also favours simple odometer checks rather than the "black boxes" that have raised concerns in Britain where public support for pay-as-you-drive schemes has been far from universal.

Not just about the money

But given that gasoline prices have risen dramatically over the last few years and roads in the Lower Mainland remain congested, Whitehead acknowledges that his plan won't work unless presented the right way.

As things stand, someone who opts to leave the car in the garage and take public transit pays the same insurance rates as the neighbour who continues to drive everywhere. And that's not a good message for people to be taking home, he says.

"It's not necessarily the money itself that is the key motivator here so much as the fairness of the exercise. Just the appropriateness that you shouldn't be double-charged," according to Whitehead. "You shouldn't be charged to insure your car when you're also being a good citizen and not driving it."

While Whitehead firmly believes HDB rates will really work, he admits it can be difficult to predict the real-world outcomes of an incentives plan.

"And so what we are advocating is not certainty that this plan will have success in helping people to reduce or encouraging people to reduce," said Whitehead who has discussed his proposal with ICBC with no tangible results so far. "We're advocating trying it."

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