Popularity of pay-as-you-drive car insurance continues to grow
If you drive infrequently, you could save a bundle on car insurance by paying as you drive, rather than a flat amount for coverage every six months.
U.S. insurance companies have been offering potentially cheaper, pay-as-you-drive plans that, for billing purposes, track when, how, how much and where drivers use their vehicles instead of basing rates on statistics and past trends. The theory is that they can offer lower rates to people who seldom drive and are deemed less risky.
Progressive Insurance introduced the product seven years ago and several carriers now offer it, including at least three that launched versions late last year.
And the idea is gaining traction among consumers, it seems.
More than one-in-three drivers would consider switching from a traditional vehicle insurance plan to one based on when and how much a vehicle is driven, according to a survey conducted by Lynx Research Consulting.
Drivers could save anywhere from 5 to 30 per cent on insurance premiums depending on driving habits, according to analysts.
PAYD plans work best for retirees and college students who don't drive much, public transit users who need a weekend car and families with an extra car they drive only occasionally.
Amd while the idea has been slow to catch on here, at least one company, Industrial Alliance, has adopted a similar approach through its Mobiliz auto insurance policy for young people.
Completely web-based, the Mobiliz program offers a free one month trial and if, after the first month, the driver adopts “responsible” driving behaviour, he or she could see as much as a 25 per cent reduction in premiums over the first year.
Driving behaviour has reportedly improved for 52 per cent of the young drivers who have been taking part in the new auto insurance policy, the company reports.
Would you buy a pay-as-you-drive policy if you could? How much of a potential discount would you need as an incentive?
By Gordon Powers, MSN Money