| 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... |
