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Pay-At-The-Pump Auto Insurance

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  • 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. J. Daniel Khazzoom, 1997. "Impact of Pay-at-the-Pump on Safety Through Enhanced Vehicle Fuel Efficiency," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 103-133.
    2. 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.
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    7. David L. Greene, 1990. "CAFE OR PRICE?: An Analysis of the Effects of Federal Fuel Economy Regulations and Gasoline Price on New Car MPG, 1978-89," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 37-58.
    8. 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.
    9. J. Daniel Khazzoom, 1994. "Fuel Efficiency and Automobile Safety: Single-Vehicle Highway Fatalities for Passenger Cars," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 49-102.
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    Cited by:

    1. Luigi Buzzacchi & Tommaso Valletti, 2005. "Strategic Price Discrimination in Compulsory Insurance Markets," The Geneva Papers on Risk and Insurance Theory, Springer;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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