Is Pay as You Drive Insurance the Key to Fairer Premiums?

The workings of PAYD insurance

Insurance companies install a telematics device on the car of the insured to track usage and driving habits. These devices collect information such as the geographical area where the car is being driven, the duration for which the car is being driven, the driving behaviour of the owner/driver, total distance covered by the owner/driver. Insurance companies use this information to decide on the policy premium.

Does PAYD make way for fairer premiums?

Here are a few factors that can help you decide whether PAYD insurance the key to fairer premiums or not.

1. Rewards better driving

Car owners who have good driving behaviours will have a lower driver risk profile. As a result, they can get a policy at a lower premium.

2. Lower premiums

People who do not drive their vehicles a lot, still end up paying hefty premiums. But now you can buy pay as you drive insurance and lower your policy premiums.

3. Telematics

Since the devices are installed on the car, drivers can receive feedback on their driving in real-time. This can help drivers improve the safety aspect of their driving.

4. Better premium calculation

Unlike traditional plans, pay as you drive insurance considers various other factors and not merely your geographic location to calculate the premium.

Challenges of PAYD

Pay as you drive insurance policies are a great alternative to traditional insurance plans, particularly for people who are careful drivers and for those who do not drive a lot. However, there are a few challenges.

1. Data

The plan heavily relies on data to work accurately. Any form of technical glitch or wrong information can skew the data and thus the policy.

2. Privacy

Since the device constantly tracks a lot of information, some owners might not be comfortable with it.

3. Better Adoption

The plan is yet to become more mainstream as compared to some of the other plans. And it will take a while for it to become ubiquitous.

Conclusion

Pay as you drive insurance policies are great alternatives to traditional plans. Particularly for people who drive their car for a limited distance per year. The plan can offer better car insurance premiums and make it even more accessible due to its affordability.

Disclaimer: The above information is for illustrative purposes only. For more details, please refer to policy wordings and prospectus before concluding the sales.