Pay As You Drive Car Insurance

by Justin Weinger on October 9, 2006

The other day I was reading an interesting article regarding pay-as-you-drive car insurance, which has recently started over in Europe and will certainly find its way across the pond to the United States.

The concept of this type of auto insurance is pretty interesting: a GPS system tracks your mileage, what time you drive, what types of roads you travel on, etc. and then the car insurance company will take that gathered information and compute your auto insurance bill.

While there are certain aspects of this type of car insurance that seem pretty “Big Brother” the potential savings on your monthly bill could be pretty big.  The reason being is this type of driver tracking will allow auto insurance companies to tailor your coverage specifically to you, not to some profile that you may fit into.

For example, most current auto insurance policies are based on several factors including estimated miles driven, type of car, the driver’s record, etc., all of which are given a certain weight and then used to compute your policy’s rate.

However, what current policies usually don’t take into account are things like WHEN you put the most miles on your car and WHERE you put the most miles on your car.

For example, two people with identical driving records, who each drive the same car and put 15,000 miles on their car each year will more than likely pay the same auto insurance premium, even if one person does most of his driving during peak times and in stop and go traffic.  Under this pay-as-you-drive system, the driver who does most of his driving during non-peak time or on the highway will pay less.

It’s an interesting approach to auto insurance, and seems like it’s much more equitable than the current car insurance system.

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