Auto Insurance Industry May Adapt Pay-As-You-Drive Policy
August 9, 2008
Pretty much anybody in America can tell you that driving is not getting any cheaper. Due to a weakened economy and a stronger global demand for oil, gas prices are at their highest in decades, and likewise drivers are suffering at the pump when they have to empty their wallets to get their fill.
With most vehicles being relatively fuel-inefficient, drivers are pressed to either obtain a vehicle that is economical and easy on gas or choose to drive less frequently. In some cases, drivers opt for both choices. In recognition of the fact that many drivers are going to reduce the amount of time that they spend on the road with their vehicles, many automotive insurance companies are considering ways to provide policies that allow you to pay an amount that is tied directly to the mileage you cover in your vehicle.
For a long time, car insurers have offered policies that reward drivers who keep their overall mileage low. However, the new idea is to provide methods in which a driver can pay to cover exactly the number of miles he or she drives. This new insurance style is called usage-based insurance, or otherwise known as PAYD, or Pay As You Drive auto insurance. The idea behind this format is to install a device in your vehicle that records the mileage of your vehicle and allows your rate to be calculated based on the usage of your car.
This concept is ideal in some ways, but comes with some drawbacks that have prevented it from taking off and soaring. Firstly, the technology utilized must support this concept in a reliable, thorough, and foolproof manner. Secondly, drivers have to be willing to allow their behavior behind the wheel to be observed by the companies that insure them. While some appreciate the discounts, there are still plenty of people who are reluctant to give up their privacy. These are just a couple of the problems that insurers will be facing if they want to implement the PAYD idea.
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