A study by Quality Planning proves Pay-As-You-Drive

Quality Planning Corp (an ISO company) has published a study that shows Pay-As-You-Drive works in a pretty compelling way. They studied close to 500,000 cars over a three year period, and found that cars who drive less cost up to 44% less to insure than normal. That proves that if you drive your car less than the average, you are most likely subsidising others when you are paying your insurance premium. Not a good deal.

The following graph shows the results from Quality Planning's study:

The study compellingly proves the benefit of Pay-As-You-Drive for consumers. Sadly, the multiple prisoners' dilemma facing insurance companies means it will be a long time before consumers have more than just one or two providers meeting their needs. In Australia Real Insurance has been providing Pay-As-You-Drive insurance for close to a year, and is still the only provider.

The full article from Quality Planning Corp can be read here. Some quotable quotes from the write-up:

"the recent study reveals why both consumers and companies get a better deal when auto insurance premiums are calculated in relation to miles driven."

"During today’s challenging economic times, many consumers are driving less — and as a result, they expect their auto insurance premium to fall. However, many insurers are simply not able to respond to that dynamic."

"Clearly, annual mileage should be a major determinant of auto insurance pricing. And drivers who drive less should be rewarded accordingly."

"Today, it’s easy to integrate accurate annual mileage verification into the auto underwriting process, using the best available techniques. Insurers who do so will certainly outperform their peers.”

Thank you to Todd Litman for sending out this information. For very comprehensive information on Pay As You Drive see Todd's TDM Encyclopedia.