Serves the Commercial Small Fleet Market of 10 – 50 Vehicles

Report: Pay-As-You-Drive Insurance Not Yet Viable

February 3, 2005

A report released this week reveals that the latest new trend in auto insurance, pay-as-you-drive insurance, (PAYD) will not be commercially viable in the next three years. The report, "Telematics Development in the Vehicle Insurance Market," by research and consulting firm Strategy Analytics, found that PAYD schemes have a few hurdles to overcome. Prohibitive launch costs, privacy violations, patent fees, "back office" data integration and difficulties in measuring the costs versus benefits will inhibit the immediate widespread launch of PAYD schemes.Pay-As-You-Drive insurance (PAYD) schemes enable variable vehicle insurance premiums to be based directly on how much, and in some cases how well, when and where, a vehicle is driven, using data collated by an Electronic Data Recorder (EDR), or 'black box.' Across Europe and the US, a number of insurance companies have begun PAYD trials, including Progressive. IBM is involved in a number of trials across Europe and the US, the report said.However, the ability to verify insurance claims using tamper-proof vehicle data will drive the eventual introduction of commercial PAYD, says Clare Hughes, Analyst, Automotive Multimedia & Communications Service. "The days of the once-a-year insurance premium will eventually disappear for the majority of consumers, with the rollout of risk-based variable monthly billing," Hughes said in a statement.
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