Pay-At-The-Pump Auto Insurance

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.


Issue Date:
2000
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/10906
Total Pages:
46
JEL Codes:
L2; L9; M2; Q2; Q4; R4
Series Statement:
Discussion Paper 98-13-REV




 Record created 2017-04-01, last modified 2018-01-22

Fulltext:
Download fulltext
PDF

Rate this document:

Rate this document:
1
2
3
 
(Not yet reviewed)