Mileage-based pricing insurance and its impact on China

Abstract

Mileage-based pricing insurance, such as PAYD, is known as the “green insurance” because it is low-carbon and environmentally effective, which is the biggest innovation in the global auto insurance industry seen in the past decade. Starting from the perspective of economic externalities, vehicle negative externalities in China are described. In order to introduce mileage-based pricing insurance to the Chinese insurance industry, this paper reviews the current practice of PAYD insurance and its impacts on transport externalities, including air pollution, climate change, energy dependency, congestion, accidents, and others. Finally, enlightenment and policy suggestions are proposed, in the hope of better promoting the low-carbon economy development over the whole of China.

Keywords:

• mileage-based pricing insurance
• externalities
• low-carbon economy

Acknowledgements

This work is supported by a project from ‘the Fundamental Research Funds for the Central Universities’ (NKZXTD1101) and a project from NSFC (71271121).

Notes

^1. In the China Vehicle Emission Control Annual Report (2011), it was reported that nationwide vehicle emissions of CO were 40.804 million metric tons, but this was corrected to 33.622 million metric tons in the China Vehicle Emission Control Annual Report (2012), and the data for HC, NO_x, and PM was also corrected.

^2. http://www.washingtontimes.com/news/2013/mar/14/china-poised-to-top-us-as-top-oil-buyer/