Pay-as-You-Drive Auto Insurance Programs Growing in Popularity
The option of paying for auto insurance coverage when needed is growing in popularity very quickly, according to a new insurance advisory firm report. As many as 75 percent of property-casualty insurers believe pay-as-you-drive (PAYD), or usage-based insurance, will change the car insurance industry between now and 2020.
Usage-Based Auto Insurance Becoming the Norm
The new report, released by Strategy Meets Action (SMA) revealed that a large number of property-casualty insurers are jumping on the concept of usage-based auto insurance.
Usage-based, or pay-as-you-drive coverage, is insurance that allows a policyholder to base their premium payments on the number of miles they drive, which usually helps to reduce the cost. Depending on the insurer, other aspects could be factored into the cost of this type of coverage, including driving behavior.
According to the SMA report, 70 percent of property-casualty insurers are engaged in some aspect of pay-as-you-drive auto insurance. Eight in 10 of the top U.S. companies are said to have UBI programs or pilots in progress.
Is Pay-as-You-Drive Right for You?
While pay-as-you-drive insurance is growing in popularity, this type of coverage may not be the right choice for all drivers. The best way to know whether it is right for you is by closely examining its common features:
- Pay based on miles driven: If you are a person who does not drive your car often (e.g. you are retired or work from home), you may benefit from coverage that rewards you for being on the road less.
- Driving behaviors may be examined: Your driving behaviors may be examined, including how fast you drive and where you take your vehicle.
- Tracking device may be installed in vehicle: Most companies install a tracking device into the vehicle to track driving behaviors. Keep this aspect in mind if privacy is a concern.
If youâ€™re comfortable with the primary features of many PAYD programs, then you may benefit from this type of auto insurance coverage arrangement. Reports show that those who do sign up for these programs experience cost deductions between 30 and 50 percent.
To learn more about usage-based auto insurance, take time to shop around with insurers offering this product, including Progressive, Travelers and Liberty Mutual.