Cost and privacy concerns stall PAYD car insurance
For a little while, anyway
Pay-as-you-drive car insurance will not be commercially viable anytime in the next three years, according to Strategy Analytics. It cites privacy concerns, launch costs and patent fees, along with back-end data integration, as significant short-term obstacles to the technology's mass-scale deployment.
Under pay-as-you-drive insurance, a black box records data about the driver's journeys. Charges vary, according to the risk of each journey. Last August, Norwich Union started testing the technology in the UK, with a pilot scheme for younger drivers launched this year.
Clare Hughes, a Strategy Analytics analyst, said: "While PAYD protects drivers from generalized assumptions, there are still major hurdles to overcome before PAYD insurance schemes are commercially viable; and these are not going to be successfully addressed for a number of years."
But in due course, PAYD will become widespread, she said. Its introduction will be driven by an increased government focus on road safety, the availability of tamper-proof vehicle data to verify insurance claims, and the potential cost savings to the companies and the consumer.
"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." ®