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Pay-At-The-Pump Auto Insurance

Author

Listed:
  • Khazzoom, J. Daniel

Abstract

PAY-AT-THE-PUMP is a proposal to replace the current insurance system of lump sum payments for automobile insurance by a mechanism whereby motorists pay for their insurance as they buy fuel for their vehicles. PAY-AT-THE-PUMP has several advantages. It reduces insurance cost and cross subsidies and enhances equity. It also benefits the environment, safety, balance of payments, and security. In this paper we study limited but very important issues in the theory and implementation of PAY-AT-THE-PUMP insurance. We address issues of efficiency, subsidy, equity, externalities, safety, insurance cost and cost of insuring the uninsured motorist under a PAY-AT-THE- PUMP regime. We use the insurance industry's criticisms of mandatory auto insurance as a lens through which we view PAY-AT-THE-PUMP insurance and ask how PAY-AT-THE-PUMP fares by comparison. Finally we address one aspect of insurance that has been neglected in the current debate -- the human dimension of the problem of uninsured motorist and the contribution PAY-AT-THE-PUMP can make to solve this problem.

Suggested Citation

  • Khazzoom, J. Daniel, 2000. "Pay-At-The-Pump Auto Insurance," Discussion Papers 10906, Resources for the Future.
    • Handle: RePEc:ags:rffdps:10906
    DOI: 10.22004/ag.econ.10906
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    File URL: https://ageconsearch.umn.edu/record/10906/files/dp980013.pdf
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    References listed on IDEAS

    as
    1. Smith, Eric & Wright, Randall, 1992. "Why Is Automobile Insurance in Philadelphia So Damn Expensive?," American Economic Review, American Economic Association, vol. 82(4), pages 756-772, September.
    2. repec:aen:journl:1997v18-03-a05 is not listed on IDEAS
    3. J. David Cummins & Sharon Tennyson, 1992. "Controlling Automobile Insurance Costs," Journal of Economic Perspectives, American Economic Association, vol. 6(2), pages 95-115, Spring.
    4. repec:aen:journl:1986v07-01-a05 is not listed on IDEAS
    5. Gaudry, M., 1986. "Measuring the Effects of the 1978 Quebec Automobile Insurance Act with the Drag Model," Cahiers de recherche 8644, Universite de Montreal, Departement de sciences economiques.
    6. repec:aen:journl:1990v11-03-a02 is not listed on IDEAS
    7. Robert W. Hartman & Stephen D. Sugarman, 1994. "“Pay at the pump” auto insurance: The vehicle injury plan (VIP) for better compensation, fairer funding, and greater safety," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 13(2), pages 363-368.
    8. Khazzoom J, Daniel, 1995. "An Econometric Model of the Regulated Emissions for Fuel-Efficient New Vehicles," Journal of Environmental Economics and Management, Elsevier, vol. 28(2), pages 190-204, March.
    9. repec:aen:journl:1994v15-04-a04 is not listed on IDEAS
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    Cited by:

    1. Luigi Buzzacchi & Tommaso M. Valletti, 2005. "Strategic Price Discrimination in Compulsory Insurance Markets," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 30(1), pages 71-97, June.
    2. Mercedes Ayuso & Montserrat Guillen & Ana María Pérez-Marín, 2016. "Telematics and Gender Discrimination: Some Usage-Based Evidence on Whether Men’s Risk of Accidents Differs from Women’s," Risks, MDPI, vol. 4(2), pages 1-10, April.

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