Paper:ewp-le/9902002 From: Date: Fri, 12 Feb 1999 13:27:54 -0600 (CST)
Americans drive 2,360,000,000,000 miles each year, far outstripping other nations. Every time a driver takes to the road, and with each mile she drives, she exposes herself and others to the risk of accident. Insurance premiums are only weakly linked to mileage, however and have largely lump-sum characteristics. The result is too much driving and too many accidents. This paper begins by developing a model of the relationship between driving and accidents that formalizes Vickrey's [1968] central insights about the accident externalities of driving. We use this model to estimate the driving, accident, and congestion reductions that could be expected from switching to other insurance pricing systems. Under a competitive system of per-mile premiums, in which insurance companies quote risk-classified per-mile rates, we estimate that the reduction in insured accident costs net of lost driving benefits would be $9.8 - $12.7 billion nationally, or $58 - $75 per insured vehicle. When uninsured accident cost savings and congestion reductions are considered, the net benefits rise to $25 - $29 billion, exclusive of monitoring costs. The total benefits of a uniform per- gallon insurance charge could be $1.3 - $2.3 billion less due to heterogeneity in fuel efficiency. The total benefit of "optimal" per- mile premiums in which premiums are taxed to account for accident externalities would be $32 - $43 billion, or $187 -$254 per vehicle, exclusive of monitoring costs. One reason that insurance companies may not have switched to per-mile premiums on their own is that most of the benefits are external and the transaction costs to the company and its customers of checking odometers could exceed the $31 per vehicle of gains that a single company could temporarily realize on its existing base of customers.
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EconWPA began as a conversation between Bob Parks and Larry Blume on January 28, 1993. I located Paul Ginsparg's archive (then xxx.lanl.gov) and he graciously installed his software on a Sun Sparc system which was supporting the department of economics email and computation. EconWPA began accepting papers July 1, 1993 and had ftp, email, gopher and web interfaces. The web interface for submissions was engineered into existence in July 1995. A complete and catastrophic machine failure in 1999 caused the loss of EconWPA's email new paper announcment service at which time there were over 15,000 subscriptions with over 8,000 unique email addresses.
I was told that I could keep operating EconWPA (as well as many other services including rfe.wustl.edu, barnett.wustl.edu, and three RePEc servers) but I would receive no support (hardware, software, or anthing else) and (as had been the case) no compensation. At that point, given the apparent low valuation of my activities by the department, and university, it made no sense for me to continue operating EconWPA or other services.
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A Chinese curse states May you live in intersting times. I have. Bob Parks - Jan 2006