Pay-as-you-drive keeps rolling along

The pay-as-you-drive movement in auto insurance got two big boosts in March, one in the United States and one in Europe.

Pay-as-you-drive insurance bases rates on individual’s driving habits. Drivers are monitored by on-board computers that monitor how much and how safely they drive. A cautious occasional driver would pay less. The monitoring devices are the latest in telematics, the technology of computers on the go communicating with central devices. (GPS devices are the most common example.)

In the United States, Progressive Insurance has decided to put its advertising muscle behind its Snapshot product. Your car, if it was built after 1996, contains a computer that monitors driving. The Snapshot device plugs into that computer and sends information to Progressive. If a customer’s driving habits are better than average, he or she gets a discount.

After 30 days, a customer could log on to see what discount was earned and how to do better. The service is available in 32 states.

In December, State Farm and the Automobile Club of Southern California launched a program. A report in Streetsblog San Francisco indicated State Farm’s program used the OnStar system to capture odometer readings.

In the UK, meanwhile, soaring auto insurance rates have customers casting about for discounts, piquing interest in pay-as-you-drive. Young men pay more than  £3,000   ($4,830) a year for coverage. Women will see rates rise over the next year as gender-based rating is phased out, thanks to a recent European court decision.

The Daily Mail reports that Co-operative Insurance launched a pay-as-you-drive service for young drivers, with AA Insurance expected to follow suit this year. The article focuses on an 18-year-old man using a firm called Insurethebox to cut his rate to  £3,100 ($4,991) from  £5,500 (  $8,855) a year.

His 10-year-old Ford Fiesta has a satellite tracker that monitors his car’s speed, its acceleration, the G-forces from applying brakes, cornering and the time of day the car is driven. He receives a driver rating between one and five and can monitor the results online.

His policy covers him for 6,000 miles a year. If he drives more than that, he can buy more miles – similar to the way you can re-load a prepaid cell phone – or he can earn them by driving safely.

Pay-as-you-drive proponents emphasize two other benefits. The rapid feedback gives an incentive to drive safely. That’s good risk management. And the incentive to drive less means some people will forgo trips to save cash – the Brookings Institution estimated savings up to 8 percent in California. That reduces energy consumption and unclogs the roads a bit.

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