Mileage-based car insurance?

I don't drive that much and it is mostly city driving. If my community had decent public transport to my job I'd probably take that. But I know people who drive a lot, commuting one to two hours a day to work and the same back. They are at greater risk for an accident than I am because they are on the road more. But they usually pay less car insurance because their cars don't get stolen as often. They deserve the break in theft insurance because their risk is less. Why don't I get a similar break on accident insurance because I drive less?

A Japanese insurance company is now offering car insurance keyed to miles driven, determined by a device in the policy holder's car:

Pay-as-you-drive insurance (or PAYD) offers huge advantages over the all-you-can-drive policies that dominate the U.S. First of all, PAYD is fairer, since it doesn't force low-mileage drivers to subsidize people who drive a lot. Generally speaking, crash risk accrues by the mile: People who drive more crash more. But most insurance policies don't sufficiently account for the differences in risk -- meaning that low-mileage drivers overpay for insurance, while high-mileage drivers underpay. Even the policies that give a price break to relatively low-mileage drivers don't close the gap: People who don't drive much still get shafted.

Not only is pay-by-the-mile insurance fairer to low-mileage drivers, it also creates an automatic disincentive for extra driving: Just as an all-you-can-eat buffet makes it more likely that you'll gorge yourself, all-you-can-drive insurance policies make it likely that you'll drive more. Because most people pay more for their car insurance than for gas, PAYD has roughly the same effect on driving as a doubling in the price of gas.(via Gristmill)

Of course I don't live in Japan. But Gristmill now tells me that California is contemplating a similar scheme. And there is an Environmental Justice bonus as well. Minorities who live in urban neighborhoods won't be paying higher rates for accident insurance than suburban drivers with similar records. As Gristmill points out, this isn't a reality yet:

Obviously, this is not yet a done deal. But it's still promising -- because it could make the automotive insurance system fairer to people who don't drive much (notably women, the poor, and city-dwellers), and because it could give all drivers the opportunity to control their insurance costs by driving less.

Sounds like the only ones who don't win on this one are the oil companies. It's a good thing they don't have much influence with the government.