Pay-as-you-drive Policies

By Author: Marcus Stalder
Total Articles: 491
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The world can become too complicated, overwhelming us with choices. When there are so many, how do you decide between them? It all gets rather arbitrary when the differences between the different products and services are so small. But, every now and again, a change does come. Not in reducing the choices, you understand, but in adding a novel idea that might just force change in the particular market. So look at the very conservative world of insurance. Nothing has changed for centuries. You pay your premiums and then have to fight to make a successful claim. But now there's a new player in town. Spreading to twenty-seven states on a trial basis comes pay-as-you-drive (PAYD) insurance. Unlike the conventional policy which estimates how many miles a year you are likely to drive, this is real usage insurance. Put simply: the less you drive, the less you pay!

We could all applaud the insurance industry. It's finally gone green, caring for the environment by giving price incentives to drive less. That's thousands of tons of carbon that stay in your tail pipes. The world will not warm as fast. More importantly, it begins the ...
... process of weaning us off oil. We are less beholden to the Middle East states. If we drive less, there will be fewer accidents. That means lower premiums as medical expenses fall and the cost of repairs is less. It all looks good for insurers. We should all be doing this anyway. Using our vehicles less, switching to public transport if we cannot walk or ride a bicycle where we need to go. The manufacturers are pointing the right way too with more miles to the gallon. The price of gas is going up again. Let's all drive less and save money.

If you drive less miles at off-peak times and avoid accidents, your premiums will fall. Most companies are offering a small transmitter fitted into your vehicle which transmits information on the time, speed and length of your journeys. In other words, it ties in with your GPS system. It also helps track your vehicle should it be stolen. The others physically inspect your odometer readings. On average, the savings are about 30% off the standard premium. In some cases of ultra low use, State Farm in California is promising a reduction of 45%. So is PAYD the best invention ever? Well, it depends on what you think of allowing the insurers to collect all this information about you. You may save money, but there are privacy issues. The insurers could also decide to increase your rate if they discover you break the speed limits.

When you get your next batch of free auto insurance quotes, look to see whether you are lucky enough to live in one of the twenty-seven states, look for the option. You may find the savings make some sacrifice in your privacy acceptable. The biggest push is going to be in California where State Farm and the Auto Club of Southern California are rolling out major policies in February 2011. There hasn't been all this excitement in the quiet pool of auto insurance since Henry Ford promised to sell colored Model Ts.