Is Pay As You Drive Auto Insurance On The Horizon?
Posted by Maria Allen on Jan 12, 2011 | No Comments »
According to most insurance companies, the more you drive the more chance you have of getting into an accident and filing a claim. It’s a pretty basic principal that makes sense to most people. Well, it makes so much sense that some auto insurers are thinking about introducing pay-as-you-drive (PAYD) insurance policies. This basically means that people who drive more miles will generally pay higher rates than those who drive less.
According to a report on PR.com, some insurers are looking into the benefits of PAYD programs as an alternative to traditional auto insurance coverage. Currently, most insurers ask their clients how many miles they drive on a yearly basis when calculating the cost of their policies. Those who drive more pay more, but there’s not really any proof of how far anybody drives.
A PAYD program will include some type of proof or verification on how many miles a person drives each year instead of just having them offer the company an estimate. Insurance companies say this could lead to new tiers for smaller mileage drivers as well as lower-priced premiums for people who don’t drive very often.
The articles suggests that drivers do a little bit of comparison shopping to see if any insurance providers offer low-mileage discounts on premiums. Simple logic is used it provides an answer for those who ask why they should pay just as much in premiums as daily drivers when they only drive their cars a few times a month.
Of course, the whole premise is based on statistics though. Just because a person only drives a few times a month doesn’t necessarily mean they’re a good driver or won’t have an accident. But the PAYD program could encourage people to use alternative modes of travel, such as public transportation, and could lead to fewer vehicles on the roads.
The Brookings Institution released a report in 2008 that showed people who drive an average of 30,000 miles per year file more than twice the number of claims for property damage or bodily injury than those who drive 5,000 miles a year.
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Tags: Insurance, Insurance Horizon