Pay As You Drive: New Technology on the Road to Success?

Quietly, in a room somewhere in East Anglia , a revolution in car insurance is happening. A concept called ‘Pay As You Drive' is sweeping the nation, and that's \no great surprise. Borrowing the name from its ‘Pay As You Go' mobile phone cousin, its potential for the car insurance market is simply huge. It's predicted that someday, all drivers will have this form of insurance. It's cheaper and encourages drivers to be greener. It's possible to do right now and is spiralling in popularity. So how exactly does it work?

‘Pay as you Drive', or PAYD, works by remote tracking of your vehicle using a so-called ‘black box'. Using the latest satellite technology, information about your car is transmitted to a central server in the east of England , and you insurance bill is worked out per mile. This means that instead of the rough estimation of mileage that other insurance companies go on, the PAYD system works on precise electronic calculations. It can tell a variety of things about your driving habits, including when you drove the car (night time driving will attract a higher rate); where you car is driven to (higher risk areas will increase the cost per mile) and how far you drove (the longer the journey, the more you pay). Ever resented the fact you're shelling out vast amounts on insurance premiums whilst you're away on business and the car sits unused in the driveway? With PAYG that's something you just don't have to worry about anymore.

Logically, it follows that a small flat rate has to be paid to cover the car against fire and theft. This doesn't change if you're driving the car or not. But it is reduced – the less your car is on the road, the less chance it has of catching fire or being broken into. If you have a garage with a lockable door then the premium will be lower still. As for the actual pricing itself, the rate varies depending on the age of the driver. Invariably, the 18-23 year old age group will end up paying more due to their high instances of crashes and accidents. This is unavoidable, and is an unchanging constant in the world of insurance. People over 24, however, can expect a great rate of return. As a rough guide, PAYG is expected to save those who drive 6,000 miles a year or less a considerable amount on their insurance premiums. Great news for business men who spend time away from home; those living in the city who might use their car once a week for the supermarket shop, or older drivers who may only infrequently use their car for visiting relatives or social events. Unless you're putting serious motorway miles away every year, the PAYG system has undoubted benefits in the world of car insurance.

The question must be asked though: are there any downsides to this seemingly infallible system? The question of personal privacy has to be asked. The box can in fact track your every movement, and the manufacturer has made no promises not to release details on your movements to the appropriate authorities if asked. If you were engaged in activity of a private sort that involved the use of your car to travel to and from the place of occurrence, you may not appreciate your movements being recorded. However, in the same vein, the black box could prove invaluable as an ally-by. Assuming you're not engaged in criminal activity, the box provides a water-tight witness to your movements if you were ever to be suspected of illegal activity. Those worried about being caught for speeding and other driving offences do have cause to be concerned: the police are already looking into ways to convert the box to record speeds achieved in the car, and to automatically prosecute those who do not abide by the speed limits of the land. Thinking of this another way, the PAYD system may actually prevent you from getting any points put onto your license: an early warning beeper system will surely be installed to forewarn you of an impending speeding offence. This could prevent the misnomer from ever actually taking place.

This overview of the PAYD system hopefully provides you with a fresh account of the riddle that is finding the correct car insurance. It may be unconventional, but it looks like the PAYD system is here to stay. It should be noted that the system isn't for everyone – those doing a high mileage every year (consumers with a long commute to work, for example) will find the system actually costs more. But for many of us – including those with teenage children who are just starting to drive, and need a close eye kept on the amount of miles that they're racking up – the PAYD system seems to make perfect sense.