Pay As You Drive insurance gets Brit road test
Under a plan offered by British insurer Norwich Union, GPS helps determine how much drivers pay for their auto insurance.
The company’s Pay As You Drive plan uses GPS to calculate monthly insurance premiums based on how often, when, and where a person drives, basing the premium on the individual’s driving habits–rather than everyone else’s–and potentially saving the customer some money.
A black-box GPS unit provided by Trafficmaster is installed in the trunk or under the dashboard so it cannot be disturbed or tampered with. Once the unit is fitted on the car, the insured motorist’s journeys are monitored to see what types of road they drive on, and whether they drive at peak or off-peak times. This generates a price per mile that is totaled on their monthly bill.
The objective is to help drivers control insurance costs by making informed choices about when to use the car. Examples of pricing might be 1 penny per mile for off-peak motorway driving for 24 to 65 year olds, and as much as [pounds sterling]1 per mile for an under 24-year-old driver at night.
Norwich Union has been piloting the project since 2004, with 5,000 customers recording data on 100 million miles from more than 10 million trips.
The program especially targets young motorists. “We tested young drivers because they have an issue with high insurance charges so we wanted to find ways to help them,” said Norwich Union’s product development manager Sue Rowland. “On average, they saved 30 percent on their premium.”
The Pay As You Drive bill looks similar to a mobile phone bill, with premiums for each journey calculated and totaled. According to lain Napier, director of Pay As You Drive insurance, this transparent approach to motor insurance will help customers control insurance costs.
“We’re confident that Pay As You Drive insurance is simply a fairer way of calculating premiums and gives customers greater control, flexibility, and choice,” Napier said. “That is why we expect this unique UK proposition to be a huge success with motorists.”
The Association of British Drivers (ABD) is not fond of the plan. “Aside from the obvious implications for privacy and civil liberties, the ABD warns drivers that this information can also be used for the government’s planned road charging scheme.” In that proposal, aimed at cutting congestion, “pay-as-you-go” road charges would replace road and gas taxes. Every vehicle would be equipped with a GPS black box to track its journey. Costs would range from as little as 2 cents per mile in rural areas to [pounds sterling]1.34 per mile for peak time in city areas.
An ABD spokesman who participated in the initial 5,000-vehicle trial said, “Insurance premiums are already based on a driver’s accident/conviction history, age, the number of miles traveled annually, and the vehicle’s insurance group. Why do we need to attempt a micro-managed premium calculation? We don’t. The government’s own research shows that they are not trusted with an individual’s personal journey details by the majority of the British public. The use of service providers, such as insurance companies, is seen as a way around the problem.”