The headlines in a British Columbia newspaper announced recently in bold gothic print, Gas Tax Boost Eyed For Transit.

When are our political leaders going to get it? There is tax fatigue in this country.

We need new leaders who possess the capacity to approach each new business decision as revolutionary. No longer can decision-makers, whether they are in the public or private sector, be permitted to apply “the managerial capitalism solutions” introduced by Henry Ford in 1910 to solve today’s funding shortfalls.

Strategic creative thinking must take place because globalization has increased competition; governments have cut services notwithstanding increased direct and indirect tax; and we all must accomplish more with less. We have a duty as business practitioners to obtain the best value for money that is possible from our dwindling and scarce resources.

Let me illustrate.

The Oregon Environmental Council passed an innovative bill (House Bill 2043) this year that encourages automobile insurance companies to tie motor vehicle insurance premiums to the number of miles automobile owners drive.

Their research indicated that there was an appetite for “pay as you drive” insurance. They pointed out that, a pay-as-you-drive solution is a more accurate reflection of the individual’s risk of being involved in an accident.

They converted annual insurance premiums into a per-mile fee.

In calculating the appropriate premium, the customary risk variables such as the customer’s driving history, vehicle types and geographical territory were analysed by the actuaries. Drivers were then to be billed on the basis of miles per year that they drove their vehicle.

I would suggest that our political leaders build on this model with the following enhancements.

Effective immediately, close all private and public automobile insurance agencies.

Insurance premiums will be paid with every fill-up. A few cents will be included in the cost of each tank of gas and segregated for the insurance premium account by the fuel companies. If you wish to drive your SUV rather than a hybrid, if you choose not to bicycle/walk to work, if you make the decision that car pools are not for you, then you will buy more gas and therefore more insurance.

Fuel companies will remit to the insurance underwriters the premiums collected as part of their current return, accounting for the other considerable taxes these companies currently collect and subsequently remit to both levels of government.

This would seem to be a more equitable method of collecting insurance premium payments. It would ensure that all cars on the road (because they need fuel to operate) would be insured; significant administrative overhead would be reduced; drivers would have more control over their driving expenses; and the initiative would provide a strong financial incentive for automobile owners to drive less!

Clearly a win-win situation. In Oregon, the research suggests that drivers paying by the mile reduced their driving by about 10 per cent and saved up to 24 per cent on their automobile premiums. I, for one, would welcome this outcome.

The Oregon study also reports that a 10-per-cent reduction in driving is estimated to result in a 17-per-cent reduction in automobile crashes. An additional saving for provincial health-care programs is not calculated in the equation.

The values of sustainability, greening and environmental conservation resonate with greater frequency with all of us. Clearly, this would be a great boon to the environment as driving less will mitigate the impact on the climate – it will improve air quality, it will reduce toxic runoffs from the roads and it will reduce the need to build expensive new road capacity. This clearly aligns with Canada’s somewhat shaky agreement with provisions of the Kyoto accord in a painless and seamless way.

In addition, this method of insurance premium payment will be more affordable because of the incremental nature of the payments.

This would be a direct boon to lower-income citizens who tend to drive less than the middle-upper-income drivers. Indeed, under such an initiative, tourists would contribute to the global premium base with every fill-up. And as Martha Stewart says: “That is a good thing.”

This pay-as-you-drive insurance initiative is an innovative new pricing concept that will reward motorists for driving less and will give them more control over their insurance premiums.

I would recommend this initiative as amended to our political leaders for their examination, adjustments and implementation.

It is this type of new mental model that must be adopted by our leaders rather than mindlessly introducing legislation/regulation to resolve their financial shortfalls through simply increasing taxation by announcing, Gas Tax Boost Eyed For Transit.

(Terrance Power is a Wharton Fellow and Professor of Strategic and International Studies with the School of Business at Royal Roads University in Victoria, BC. He can be reached at tpower@businessedge.ca)