Car Insurance – A Brave New World

One of the most prominent UK insurance companies has won the race to introduce road pricing. They launched a car insurance policy that takes into account more than just the usual factors used to determine insurance premiums, such as driving experience, age, gender, vehicle type, etc. You also drive where, when and how often.

This scheme has been in trial for two years. It is based upon statistics that show individual driving habits can have an impact on accident risk. This means that driving in rush hour can increase the risk by 50% compared to driving on the same roads during the weekend or at night. Driving on motorways is 10 times more safe than driving on urban streets. Statistics also indicate that nighttime is a more dangerous time for accidents.

The policy charges a fixed monthly amount plus a per-mile charge. This can range from 1p to as high as PS1 for young drivers who use their car at night. It relies on information provided by the black box that is fitted to your vehicle. It uses GPS technology to track how often, when, and where you drive. This information is used to generate a monthly bill that includes a pay-as you-go itemised invoice showing the premium for each month’s journeys.

The company behind this scheme, Norwich Union, claims that the new policy offers consumers more options and is a fairer way to calculate premiums. It is specifically tailored to their driving habits and personal preferences. The company claims that this policy may be beneficial for those who drive less than 8,000 miles per year. The cost per mile is very variable, especially for young drivers. This will also depend on what type of driving you do. While you may see a financial benefit if you drive low-mileage off-peak motorways, it remains to be seen how many others will. Although Norwich Union expects the policy to be a great success, independent surveys have revealed that drivers are resistant to having their activities monitored.

This policy has other drawbacks than the concerns about civil liberties.

Drivers won’t know how much insurance they have paid unless their driving habits remain the same from month to month until they receive their bill.

This policy can be copied by other insurance companies, which could lead to confusion about the relative costs of policies from different companies.

Consider mobile phones as an example. How many people can tell if their network provider has the best deal, or if a cheaper supplier is available? You can compare hundreds, if not thousands of tariff combinations in order to make an accurate comparison of costs. Norwich Union has already begun to create confusion by offering young drivers 100 off-peak miles per year.

It is also smart to switch to monthly billing. An annual bill allows insurance companies to raise premiums only once per year. Any increase is visible immediately. A rolling monthly policy, however, allows for more frequent adjustments to the price. The increases will also be less noticeable, making them more acceptable. Companies would have the freedom to adjust at any time. You could change insurance companies after a premium increase, but then be subject to an increase by the new provider. This is evident by the rise in energy bills.

This policy will be beneficial to some drivers if they don’t worry about their activities being tracked and recorded. However, it will not benefit all drivers, especially those who have to use the wrong type of road at the wrong time of day.

Before you commit to buying car insurance, make sure that you do your research and compare the prices of different providers. Keep track of all your expenses and make sure to check them regularly.