1.4.15
The New By-the-Mile Car Insurance Policy
12:19 PM
Having a hard time understanding the ins and outs of how the insurance companies decide on the price of your car insurance policy? Here's a new piece of insight. If at the end of the year, your insurer sees that you haven't driven very much over the course of the year, they feel you don't really need to pay them the full price anymore. Actually this has been an insurer mainstay for a long time - the low mileage bonus that they can arrive at either by asking you how much you need to drive each day, or primarily by looking at how long you've had the car and how much you've driven. But that bonus is crumbs your way compared to what they are thinking of now. They're planning to turn the whole car insurance concept on its head, and they're going to calculate your premium completely on a per-mile basis.
They call this the usage-based car insurance policy. And in some places, it goes by the name of PAYD (pay as you drive). What they do is, they turn your car into some kind of a taxicab; they put in a discreetly-mounted meter on your car that's supposed to keep count of exactly how many miles you drive in a year. Companies like Texas' Progressive for instance, have been offering Texans a car insurance policy based on the meter called MyRate, for more than ten years now. Now that the trial has worked out, they're offering it all over the country over this year. Actually, a clutch of states around the South like Alabama, Georgia and Louisiana, and several up North like Michigan, Maryland Oregon already have this option.
When you sign up for a PAYD car insurance policy, the agency sends an installer to place the device on your vehicle. Usually, it finds its home on the underside of the steering column on your car, and it collects more than just how many miles you drive. Pretty often, it records information about your driving style, and how often you use your car. The device uses a wireless connection to the company - where they put your driving information together with other traditional factors that affect your insurance, what your age is, your sex and your driving record, to set up a custom car insurance policy just for you. If you're someone who doesn't drive much at all, you could actually shave half off your traditional insurance premium.
On the other hand, if they find out that you constantly drive near the top of the speed limit, and you drive a lot in the middle of the night when they know that the statistics say most accidents occur, you'll pay more - about 10% more. One imagines that the wireless connection will also tell them what parts your driving in, so that they can tell if your chosen area is high risk or low risk. It will even know if you are in a hurry one morning, and really stepped on the gas for about 5 seconds to quickly get to 40 mph in just 3 seconds - and boy, will you pay.
Most car insurance policy majors are testing out a version of the PAYD scheme now with volunteers and their own proprietary devices - Allstate, State Farm, The Hartford - the entire lot. It is to help everyone keep an eye on the way they drive, and cut out wasteful miles. And parents can get a clue as to what their children's driving habits are like, too.