Why Most Insurers Talk About "Usage Based Insurance"
"Pay As You Drive" is a registered trademark of Progressive Insurance, and was filed back in 2007. Therefore, although other insurance companies can describe their plug-in monitoring policies in a similar manner, they can’t use the term in advertising or monitoring. This is one reason that the term “usage based insurance” is such a hit, since it is descriptive but less likely to get someone sued. According to the filing (which is why the following is in all caps) “PROVIDING PREMIUM RATES CALCULATED ON THE BASIS OF COLLECTED INFORMATION PERTAINING TO THE USE AND OPERATION OF MOTOR VEHICLES.”
Regardless of the company, mileage based plans are an affordable side of the Usage Based Insurance (UBI) craze that is sure to put Big Brother under your dashboard. While most insurers use UBI and telematics technology to discover who the good and bad drivers are, without the use of actuarial statistics, others are taking a different tack, and charging people for usage based on mileage. There are several key groups of people who could save big on insurance, and potentially keep driving instead of ditching their cars in a cane field and letting nature take its course.
The top groups served by Pay-as-you-drive policies include senior citizens who don’t do a lot of commuting, urban hipsters who feel the need to own a Prius but commute by bicycle and oversubsidized light rail trains, and people who work from home. Hermits, shut-ins, and people who keep their cars parked in a relative’s front yard and need to keep the tags up to date also would benefit from insuring cars that they rarely use if they only had to pay for miles driven. While many in the younger set could not imagine having a car and not driving it everywhere, including a few hundred yards down the street to a friend’s house, there are plenty of folks who are essentially subsidizing everyone else’s claims even though they don’t drive enough to be a hazard.
PAYD Advantages
The upside to pay-as-you-drive (or pay how you drive) involves the ability to keep your car current for a few bucks assuming you don't lend it out to people who go everywhere and leave you with an empty gas tank. Plans like Metromile offer a "base rate" along with a charge of two to eleven cents for each mile driven, and your rates are still based off the typical criteria of where you live, where the car is "garaged" and whether you are married or single. It is ideal for people who don’t exceed ten thousand miles. In places like California, where you can’t penalize people for their driving habits by monitoring them, this is popular among the low mileage crowd. GMAC insurance offers a similar program for driving less than 15,000 miles a year, and only gathers mileage statistics via the Onstar system. Another player, Driveway Software, uses smartphones instead of plug-in dongles for information gathering.
The downside, of course, comes for those of us who have lead feet and like to drive long distances. A PAYD policy would be of little use to people who rack up the miles the way their kids rack up cellphone minutes. In fact, the insurance companies that bill you for miles driven would hit you up with a pretty big bill if you decided one month to replicate the trip John Steinbeck took in Travels With Charley, or if you make frequent trips transporting moonshine across Hazzard County wondering exactly what Uncle Jesse did to so many of his brothers and sisters and in-laws to end up with 3 orphaned cousins (5 if you count Coy and Vance) to help him with his farm work, and you know that somewhere on the internet there must be some kind of fan fiction to explain it.