A New Look at Insurance Technology: Pay-Per-Mile

Insurance companies around the world are making strides to provide a personalized insurance experience for the consumer. No longer are the days where you are categorized and placed in a group based on generic questions that you may not even have a logical answer to. With new insurance technology we are seeing companies steering away from this style and trending towards personalized insurance based on you and you only. One of the newest revolutions is coming from an insurance company out of New Jersey known as Metromile. They are introducing a new way for drivers to try and reduce the cost of their auto insurance. The product used to deliver these savings is coined as the “Pay-Per-Mile”.

What is the Pay-Per-Mile?

As you can probably guess by the name pay-per-mile, the key to the product involves tracking the distance a driver travels in a given month. The product uses a small wireless device that connects to the diagnostic port of the driver’s vehicle to track these distances. The device uses this data to create a unique rate for each driver. There is an initial base rate that the customer will pay regardless of how far they drive. They will also be charged depending on the distance they travel. Of course the distance is not all that is factored into the cost. Several other factors such as the driver’s age, history and address, along with the type of vehicle will all factor into the base rate and the pay-per-mile rate.

Does Pay-Per-Mile Make Sense For Me?

There are a few things to consider and because the pay-per-mile (or hopefully the pay-per-kilometer soon) is not yet available in Ontario it is difficult to say. In Canada we operate slightly different than in the U.S. so there will likely be changes that make it more appealing or less appealing to certain audiences. It is expected that the base rate will be very affordable and much lower than a typical car insurance policy given the nature of the product. Obviously the next major factor to determine if the product makes sense for you is whether or not you drive frequently and the distance you typically drive. If you are someone who drives 5 kilometers to work 5 times a week and rarely drives anywhere else asides from the odd grocery store run, then of course a product like this is going to make sense and save you money. However, if you are someone who has a long commute to work and has a busy schedule after work including things like driving kids to sporting events in other cities, then it is less likely that a product like this will yield the same savings.

Currently, in several of the states the product is offered, they provide an option where if you are going on a road trip or travelling for a long distance they will not penalize you. In addition once you drive over a certain distance you are not over charged. These are both wins for the consumer!

At the same time this product is not going to benefit everyone. Many consumers prefer to have a consistent premium to pay each month even if they can save using a product like this. However, the frugal consumers out there can take advantage of a product like this where the premium is essentially in the hands of the consumer.

What is the Device All About?

The device itself is not like the telematics device we have available in Ontario through companies such as Intact Insurance. The pay-per-mile device does not track acceleration speed, how hard you brake, or fast you drive, it only tracks the distance you drive. For consumers who have used telematics and enjoy its reward this is not to say that they both cannot be used simultaneously and in fact one day, as the trend towards individualized insurance rating continues progressing we will like see a system that combines the telematics and the pay-per-mile device.

Photo by Viktor Hanacek

One of the most interesting features moving forward with the product is the smart phone app paired with the device. The app offers several features such as; the optimal route to travel to your destination, distance travelled, and a helpful feature to locate your parked car. One of the most beneficial features of the app is a real time update on the amount of premium you can expect to pay at any given time based on the distance you have travelled. With this feature you can monitor you driving accordingly. For instances if you have been driving more than usual at the beginning of the month, you can tailor your driving to decrease the amount you are travelling in the later half to experience the cost savings.

The world of insurance is certainly moving towards a new, more personalized way to rate individuals for their insurance needs. With tools like this one continuing to sprouting up the future is looking very bright for the consumers. Stay tuned for more products like the pay-per-mile to show up in your city!