Interesting stats on who are the biggest train travellers, cylists, etc...

We are doing a series of interesting press releases on run of the mill census data. They deal with who the biggest users of alternative transport are in Australia. Like who are the biggest train users. Clearly these people are going to be winners when they take out Pay As You Drive!

From http://www.newsmaker.com.au/news/1938:
Residents of Summerhill are Australia’s biggest users of trains per capita and as a result many of them are probably paying far more for their car insurance than they should says Roger Grobler, CEO of Real Insurance.

Says Grobler: “We have analysed numerous Australian Bureau of Statistics figures across the suburbs of Sydney. While Summerhill residents should be commended on their extensive use of public transport the fact of the matter is that if they have a car they are still paying the same car insurance premiums as those who drive even four times the distance.

“In effect many Summerhill car owners using public transport are subsidising other motorist’s car insurance premiums.

“I believe that there are many drivers in Summerhill who are paying far more for their car insurance than they should given their profile and the distance they drive.

“These motorists are far better off exploring a pay-as-you-drive insurance system whereby they only pay for the kilometres they drive.”

Grobler points out that pay-as-you-drive motor insurance only works for those people who drive less than the average for their area and their demographic profile compared to their peers.

He gives the example of a 39 year old female living in Summer Hill who could save up to $365.29 by going to Pay As You Drive car insurance. She drives a 2007 Hyundai Getz 5 door auto and would traditionally pay motor insurance of around $807.88 per annum. Using Pay As You Drive she would pay $442.59 for 5,000kms, $486.91 for 7,000kms or $553.40 for 10,000kms of car insurance purchased.

Further examples

Cairns
Residents of Cairns are the largest bicycle users in Australia, yet like the train users of Summer Hill, are still paying the same premiums as regular car users.

A 29 year old Female living in Cairns who could save up to $193.90 by going onto Pay As You Drive insurance. She drives a 2007 Mazda 2 Neo Auto and would traditionally pay motor insurance of around $563.50 per annum. Using Pay As You Drive she would pay $369.60 for 5,000kms, $401.94 for 7,000kms or $450.45 for 10,000kms of insurance purchased.

Campbelltown
A 49 year old male living in Campbelltown who could save up to $356.97 by going onto Pay As You Drive insurance. He drives a 2007 Ford falcon Eurosport auto and he would traditionally pay motor insurance of around $874.83 per annum. Using Pay As You Drive he would pay $517.86 for 5,000km, $559.73 for 7,000kms or $621.68 for 10,000kms of insurance purchased.

Pymble
A 40 year old male living in Pymble who could save up to $323.82 by going onto Pay As You Drive insurance. He drives a 2008 Holden Lumina VE and would traditionally pay motor insurance of around $800.67 per annum. Using Pay As You Drive he would pay $476.85 for 5,000kms, $517.90 for 7,000kms or $579.51 for 10,000kms of insurance purchased.

Our Incredibly Talented Team

Once a year we have a conference at Real Insurance that is attended by our entire team. It is a very special event.

We normally have teams performing skits at our conference. This year we replaced the skits by an invitation to produce TV ads for either Real Insurance or Pay As You Drive. Our team produced over 10 adverts, which we screened on a cinema screen at the Entertainment Quarter in Sydney. The TV ads are part of a competition, and the winners are decided by a combination of the idea, creative execution and views on YouTube. The full set of ads will be placed on YouTube shortly.

In the mean time, have a look at this entry. I must say I am blown away by both the idea and the execution. Make sure you listen to the sound effects. This particular ad was made by our IT infrastructure team. How lucky are we to have such a talented group of people that are not only good with their day jobs, but that can also come up with quality like this:

News Item on California Regulations

People who follow the development of Pay As You Drive motor comprehensive insurance internationally will know that California has released regulations that allow insurers in that US state to offer Pay As You Drive policies.

The news clip below typifies a lot of the news coverage about it. Most of the news on Pay As You Drive over the last few months have been about the Californian regulations.

If you're unfamiliar with the US insurance regulations: In most states in the US an insurance company needs to "file rates", which means that prior to issuing a new insurance policy the way in which premiums are calculated needs to be approved. There are guidelines as to what rating factors insurance companies can use. So in California for instance insurance companies could not do Pay As You Drive until the regulator actually allowed rating to reflect kilometres driven.

Latest Real Pay As You Drive TV Ads

We launched a new set of ads last week for Pay As You Drive. The first one features a lighthouse keeper that drives from his house to the lighthouse every day. Not a big distance as you will see in the ad...

It is all farcical of course. As is the next ad, where a women "commutes" out of her driveway to the busstop a whole 20m down the road.

We have a new jingle in the ads, which we will be using going forward, as well as a set of end screens showing our actual team on the phones.

Lighthouse:



Commuter:



Any comments or feedback, as always, is most welcome!

Mistake by Bloomberg on reporting iPhone as a tracking solution at Farmers'...

The article referred to in the previous post was an (interesting) mistake by Bloomberg.

The following is from Farmers':

"All - I wanted you to be aware of some misleading media coverage attached below that is being distributed today by the Bloomberg News Service. The Swiss-based Bloomberg reporter confusingly leaves readers with the impression in the headline and lead paragraph that Farmers is already using technology to track miles driven by auto insurance customers. She also confuses the "pay as you drive issue" with our recent announcement regarding claims reporting via an iphone application. While the headline and first graf are misleading, the quotes attributed to me in the body of the story explain Farmers' position on this issue and provide some clarity to the story. I am working personally with the reporter and her London-based editor for further clarification, but wanted you to be aware of this if you receive any questions from staff or the field. Bottom line is that we continue to consider the future use of these type of technologies that could help us even more accurately match risk with product prices etc. Let me know if you have any other questions.


Mark S. Toohey
Senior Vice President and
Head of Media and Public Relations, North America
(805) 907-2216
mark_toohey@farmersinsurance.com”

iPhone tracking for Pay As You Drive car insurance in California

Farmers' Group in California said yesterday that they will use iPhones and Blackberries to track cars under California's new Pay As You Drive car insurance regulations (Bloomberg). That is really fascinating. The iPhone has all kinds of technology in it that makes this an interesting proposition, at least in theory.

I would be quite keen to know how they are planning to solve the issue of the iPhone only running one application at a time. You can't expect customers to switch on the application that tracks them every time they get into the car.

At least one other iPhone application that have recently been published for insurance, by Nationwide. It deals with claims handling. It is basically an accident handling kit on your phone. Very cool. As per the website, the functions are:

• Calls emergency services
• Helps you collect and exchange accident info
• Stores your insurance and vehicle info for easy lookup
• Locates Nationwide agents near you
• Takes and stores accident photos
• Converts your iPhone into a handy flashlight
• Helps connect you with towing services*
• Helps you start the Nationwide claims process*
• Finds Nationwide Blue Ribbon^SM Repair Facilities*

If you know of any other iPhone apps for insurance, please let me know!

The iPhone tracking article is below for completeness, or can be found on this link.

Zurich Financial’s Farmers Unit to Track U.S. Drivers

By Carolyn Bandel

Sept. 24 (Bloomberg) -- Farmers Group Inc., the U.S. unit of Zurich Financial Services AG that bought AIG’s auto-insurance business in April, plans to lower premiums by charging drivers for coverage by the mile, measuring car usage by iPhone and BlackBerry.

The insurer wants to base insurance costs on miles driven to “charge the right premium for the right risk” and keep premiums low, Mark Toohey, a spokesman for Farmers, said in a telephone interview from Los Angeles on Sept. 22. The company is considering offering a tracking product using mobile-phone technology at the end of this year or early in 2010.

Voluntary “pay-as-you-drive” regulations that allow insurers to base premiums on actual miles driven were announced Sept. 3 by the commissioner of the state of California Department of Insurance, Steve Poizner, who is responsible for enforcing insurance-related laws and previously founded SnapTrack Inc., which pioneered technology that put GPS receivers into mobile phones.

“We see some potential in California for using this type of technology because of California’s unique auto-rating regulations, which focus heavily on miles driven,” said Toohey. “Farmers doesn’t support the use of any technology which would require a customer to be tracked.” The company said the option to be tracked would be made available to customers and only used with their agreement. U.S. insurers are regulated separately in each state.

Insurers have been testing technology to offer pay-as-you- drive insurance in countries including the U.K., the U.S. and the Netherlands. So far, such insurance lets motorists prepay for the miles they expect to drive during the term of coverage, as with Polis Direct in the Netherlands, which is part of the Dutch automotive trade association BOVAG.

‘Very Costly’

Aviva Plc, the U.K.’s second-biggest insurer by market value, offered a policy that fitted a blackbox tracker device into cars using so-called telematics technology to record journeys. The insurer stopped offering the product last year because it “had to bear the cost of the box and the operating model was very costly for Aviva,” Erik Nelson, a Norwich, U.K.- based spokesman, said in a telephone interview today.

“We’re looking at various technologies and have set for ourselves an internal deadline for going to market with a usage- based rating option for our customers,” Toohey said. “Voluntary tracking measures and technologies may have as much relation or even more relation to accident risk as miles driven. Examples of these risk measures would be car speed, hours of day a customer drives or driving in congested areas.”

Separately, the Los Angeles-based Farmers launched last week an iClaims application for customers who used iPhones or iTouch. The application allows Farmers customer to immediately file an insurance claim.

To contact the reporter on this story: Carolyn Bandel in Zurich at cbandel@bloomberg.net

New Californian Regs published. PAYD called green.

Californian Insurance Commissioner has published the insurance regulations allowing insurance companies to do Pay As You Drive insurance. The regulations are partly based on Real Insurance's product in Australia. There is also a push for more "Green Insurance".

It is fascinating how insurance products are likely to become transformation tools for the way in which we look after the environment.

Original article here.

California Bill Calls for Green Insurance

By Timothy F. Kirn
September 4, 2009

A bill just introduced in California could encourage more ecologically friendly insurance policy products, putting the state again at the fore of pushing, and leading, for greener public policies.
The bill, which has been titled the California Green Insurance Act of 2010, could affect a broad range of insurance products, from automobile coverage, to property/casualty policies, to workers' compensation plans.
Insurance would seem a good way to bridge over a wide range of different and varied endeavors that have a significant ecological impact, in one fell swoop. But, the legislation's sponsor, Assemblyman Dave Jones (D-Sacramento) said only that the inspiration for the legislation came to him because he thinks a lot about insurance as chair of the Assembly's health care committee, and because he wants to make a contribution to the environment.
The bill was introduced eight days before the California Legislature adjourns for the year. Jones said that was not done as an attempt to ram the bill through before opposition could mobilize. Rather, it was so the legislation would be on the agenda, and interested parties—including insurance companies--could begin to discuss and hone the measure.
Jones said he has had no input from anyone in the insurance industry yet.
Green insurance is not without precedent in California. The state Department of Insurance Commissioner Steve Poizner has called pay-as-you-drive automobile insurance, an option being considered in the state, a "green" insurance because it would encourage less driving.
Moreover, Fireman's Fund Insurance Company, for one, offers green replacement property insurance as standard for some of their policies. It first offered green commercial policies in 2006. It also has green homeowner policies.
Buildings, with their energy use, contribute more carbon emissions to the atmosphere than cars and there is a real push in the real estate industry to make buildings more energy efficient and less polluting, so it makes sense to offer insurance that recognizes that consciousness, said Janet Ruiz, a spokesperson for Fireman's Fund, Novato, Calif.
"We know that it is very popular for buildings to be more energy efficient and use less water," Ruiz said.
Jones' proposal would, among other things:
--Require the state insurance commissioner to hold hearings and gather information contrasting the risk, costs, and claims of low-emission vehicles compared with non-low-emission vehicles.
--Require property insurance companies to offer green replacement coverage and to offer coverage for solar and wind distributed generation as part of a homeowner's insurance policy.
--Require the insurance commissioner to hold hearings and gather information on the risk, costs, and claims associated with green buildings.
--Require the insurance commissioner to conduct hearings regarding the health impacts on workers in green buildings, and use in the information in establishing the Workers' Compensation Claims Cost Benchmark.
--Offer state tax credits to insurance companies that invest in financial institutions that provide products and services designed to protect the environment and support renewable energy projects.

The Geek says this is the scariest thing you have ever seen

A geeky guy (he says he is a science teacher) made a compelling short video. Watch it. It is humble, compelling, contains very little hot air (except when he explodes gas in a bottle), and makes you think.


Your thoughts?

The future is electric

 BYD is bringing a $40,000 electric car to the US. It promises 250 miles to a charge. If that does not impress you, then consider that GM’s Volt only does 50 miles. Fifty miles? Why do they bother?

 

What is more, it charges 50% in only 10 minutes. How incredible is that! One of the questions that is being asked: Will the Americans get over buying a Chinese made car? Well, they got over American made cars…

 

What is more, Warren Buffet and Charlie Munger is invested in BYD. Not only that, but Charlie says it is the investment in his life that he is most proud of. And that is quite something, given that the two of them are the most famous investors of all time.

 

The future sure seems to be electric!

 

 

Some more detail here.

Gadaffi in your car

There are a large number of technological developments on the horizon that will change the way in which insurance is done. Pay As You Drive car insurance is obviously one of them, and this blog has a number of discussion points on the technology around PAYD.

Some of the other technologies also discussed are electric cars and the infrastructure to “plug-in” a fleet of electric cars. Also on the horizon is “smart cars”. Cars that either drive themselves or take over from you in the case of sensing an accident about to happen. Cars that take an action to avoid an accident, even if it means swerving over a sidewalk and maybe destroying the cars wheels. Take that one step further and you realise that if a bunch of cars are driving near each other, they need to communicate with each other in order to decide what the best collective cause of action would be. From this gets born the concept of a leader car: The car that will decide on behalf of everyone how the group will behave when a danger appears. So what happens if another car is the leader car and decides to send your car over the pavement into a pole, because that is the situation that collectively has the smallest damage. And that in a situation where, if the intervention did not take place, you would not have been involved in the accident. Interesting and even scary stuff. Imagine the insurance implications.

Some cars already have technology that senses if you start getting drowsy. The cars monitor the speed at which you blink your eyes, and if this slows down the car alerts you. Good material for comic strips.

The technology discussed in the article below (original link here), is one that I have not seen before. It intercepts text messages coming to your phone, in order to reduce the distraction of texting while driving. Having texted myself while driving, I know that it is a dangerous practice and it definitely increases the probability of causing an accident. So from a risk mitigation perspective it certainly is attractive. It is however quite creepy.

Some years back Gadaffi (I guess “colourful” is a word that comes to mind in describing this long time de facto “leader” of Libya) visited the African Union which was held in South Africa. People complained that when him and his massive entourage raced around the streets of Johannesburg that their mobile phones will stop working. Gadaffi was driving around with jammers so that people in his vicinity would not be able to use their phones. The technology below is like having your own little Gadaffi in your car. And you are safer for it!

 

Block That Text

By Pat Speer August 26, 2009

Getting people to stop endangering themselves and others because they are texting while driving may not be possible; so stakeholders are looking at technology that blocks cell phones from displaying text messages in the first place.

The technology developers face an uphill battle, however, as texting has grown in popularity at blinding rates.

In 2005, research from the Insurance Institute for Highway Safety, Arlington, Va., found that drivers using cell phones were four times more likely to get in a crash serious enough to injure themselves. Since then, that number has seen explosive growth, as drivers use Bluetooth and other technologies to hold cell phone conversations while driving. But talking is just part of the distraction, say experts.

Drivers who use cell phones to send and read text messages, face even greater danger.

According to CTIA, an industry trade organization that tracks wireless technology, the number of monthly text messages grew to 110.4 billion in December 2008, up from 9.8 billion in 2005. Because “texting” is especially popular among teens, they represent the highest risk behind the wheel. This distraction, say experts, represents the perfect storm for personal lines property/casualty insurers.

Nationwide Mutual Insurance Co.’s second annual Driving While Distracted (DWD) study, released in October 2008, shows nearly half of Americans (48%) considered cell phones to be the most dangerous distraction while driving. More than 40% say they have been hit, or almost hit, by another driver who was talking on a cell phone.

Some states recognize this. In fact, 17 states and the District of Columbia have banned texting while driving, while 10 other states plan to pass laws this year, according to the Governors Highway Safety Association. Fines and penalties vary from state to state.

And although federal laws may be ideal, regulators say this would be difficult to enforce.

The answer may be an “if you can’t beat ‘em, stop ‘em temporarily” approach, as technology solution providers gear up to produce technologies that would make safety the priority.

Much of this technology uses global position system (GPS) technology to block texts from being sent or received while the owner is driving.

In particular, Aegis Mobility Inc., Vancouver, is developing an application that uses a phone's GPS to detect when it is moving at driving speed to intercept incoming calls and texts. Called DriveAssist, the software also blocks outgoing messages, though the owner can override it to make emergency calls. The vendor says the software should be available next year, and Nationwide will be one of the first to offer a premium discount to policyholders to employ it.

Other technologies in development include voice messaging, which creates an audio message from a text message that can be played with the touch of a key. Analysts say insurers are looking at these technologies as a viable way to improve safety and reduce claims.

 

Brand new Chief Operating Officer

I am delighted to announce that Clive Mendes joined Real Insurance as our brand new Chief Operating Officer. Clive and his family (Astrid his wife, and his twin baby daughters Fabian and Francesca) moved all the way from Berlin to join our team.

Clive is an international insurance veteran and former CEO of Royal Insurance’s  Italian operation and Group Strategy Director of Royal & Sun Alliance.

I am very please that we found someone of Clive’s experience and calibre. So successful was Clive’s role in setting up the Royal Insurance operation in Italy that the Italian super brand has been written up as a case study in Marketbusters, a Harvard Business School text book. Clive’s next job is to get Real written up in book!

Some more about Clive: At 23 he was the youngest country manager in the history of the Royal Group when he was appointed to a general manager role in the Bahrain office. He later went on to manage the Lisbon office. Clive says that for the first time in a very long time he is actually conducting insurance in English!

Clive says:  “Real Insurance is not unlike the Royal operation in Italy in its early days. It is growing rapidly, has some very innovative and ground breaking products and for a company its age, it is already quite advanced and sophisticated in its thinking across every department.

“My goal is to help the Real Insurance team become a truly stand-out business to which customers faithfully and happily bond and which is respected by its peers and society in general for world-class performance, operating excellence as well as leadership and innovation across the business.”

Clive studied Languages (Arabic, Spanish and Portuguese) at Glasgow University, Business Administration at Edinburgh University and a BA in Music from the Open University.  He was born in Jamaica and has lived in the UK, Spain, Portugal, Bahrain, Germany and Italy. He speaks seven languages! - Arabic, Spanish, Portuguese, Italian, French, German and English. 

He also composes music.

Clive joins a strong Real Insurance team, which means the best is yet to come!

Changing the way we pay for using the road

A report was released on a Treasury website last week that proposes a conceptual framework for reforming taxes relating to road use and transport. It is a big report (104 pages) dealing with everything from petrol excise tax to Pay As You Drive insurance.

 

Real’s Pay As You Drive car insurance features in the report as the first (and only) insurance product with premiums linked directly to kilometres driven. It is good to be mentioned!

 

Anyway, the report is quite technical, but makes far ranging and courageous recommendations including proper taxing for road use by using telematics.

 

I think the biggest single obstacle for proper charging for road use and a removal of negative externalities is public opinion. I am amazed at the irrationality of some objections, and for others I can understand the change being perceived as unfair for a specific person. The fact is people have been using roads without much direct charge for how much they use the road (they still pay for it through other taxes). So to now accurately charge mean that some people will suddenly pay a lot more (because they use more). And this creates noise. Just think of the noise created when the cross-city tunnel fees change.

 

There is a perception that roads should somehow be free (one commentator said “OUR RIGHT TO UNFETTERED ROAD USE”). A significant amount of education will need to take place before proper charging for road use will have any chance of being implemented.

 

A large part of the emotion is addressed at the public transport system. So people that claim they have to drive because the public transport system is insufficient, claim that to tax them for driving their cars is unfair.

 

So here’s the typical argument: The only house I can afford is far away from the city, where there is no public transport. So I have to drive. Why should I pay for road use when the rich people who can afford to live in the city or close to the train station don’t have to?

 

Tough question. An answer is that if road use is properly charged for, then property away from the city or not close to public transport will become cheaper (less demand) and visa versa. So the person that made the argument above would have paid a low price for their property. The “rich” people have paid for the benefit of not having to drive through expensive property. The answer of course does not work when you have to change road charges, as the person who already owns the undesirable house will be even worse off, and have to pay for driving to work…

 

An article appeared in the Herald Sun, following the RACV making suggestions similar to the tax report above. To illustrate the emotion, have a look at some of the comments posted on the Herald Sun website:

 

Let's see, I live in the outer suburbs as I cannot afford the inner city house prices. I don't have Public Transport as it is not deemed as a reasonable use of Government funds to send the train lines out everywhere. Local councils have stuck metres at local parking areas that service train stations nearby. Now they want to tax me to drive further to work? Come on who is making these decisions?

Posted by: Stephen of Melbourne 10:18am August 28, 2008

 

This is a ridiculous idea! Watch the cost of everything go up then...for example...as a tradesman -No more free quotations, extra charges on quoted works for transport & handling costs..get the idea. These taxes will no doubt filter into costs of everyday living expenses...haven't we got enough pressures already?

Posted by: EJ of MELB 10:17am August 28, 2008

 

The first thing that should happen if this type of lunacy is adopted is for all people in this country launch a class action with the anti discrimination comission. It's not my fault that I can't afford an appartment in the inner city, it's not my fault that the only place I could buy a house I can afford is 30km from where I work nor is it my fault that I would have to travell further if my employer moves to larger premisis. And for all of you that are now madly tapping away at your keyboards to tell me I should use public transport here are the facts. When I have to start work at 6:00 am (first shift), there is not train or bus that allows me to get into the city for the line change to get to work on time and on the regular occasions when on night shift that I am required to be there after 11pm there is no way for me to get home other than by taxi ($115.00) due to the 3 zones that te taxi crosses, lastly lets not forget that this in an unreasonable (& possibly unconstitutional) impost on the taxpayer based on their usage of infrastructure for which we already pay taxes irrespective if it replaces fuel exise and registration.

Posted by: PaulM of Brisbane 10:08am August 28, 2008

 

What an outrageous invasion of privacy.

Posted by: Ophelia of Victoria 9:54am August 28, 2008

 

What a joke, once again pick on the workers, make it harder forthem to get ahead and give their kids a better life. FIX THE TRANSPORT SYSTEM and your problems will go away!!

Posted by: Joe 9:53am August 28, 2008

 

When will people wake up that personal privacy is the MOST important thing they possess in a democracy. This "idea" is one of the most malicious and scary that I have seen. Please, please DON'T underestimate the value of YOUR privacy. Once they take it away it ain't coming back!! They use all sorts of spurious excuses like congestion, crime and terrorism to try to impose government control. If you actually want to live in such a place, then simply book a ticket to Russia. Average australians are too apathetic or stupid to understand the full import of these attempts to remove personal liberty. WAKE UP!!

Posted by: Jason Thornton of Melbourne 9:46am August 28, 2008

 

Another exercise in the total regulation of private motoring , suggested by the most anti motoring cadre in Australia ..the allegedly pro motoring Automobile clubs , infiltrated and controlled by Left wing greenies to a man .Don¿t join them and don¿t support them .ITS GOING TO ELIMINATE YOU YOUR RIGHT TO UNFETTERED TRAVEL. Allied to carbon taxes you wont be able to move anywhere without Government sanction. Even if you see Aunt Jane some faceless bureaucrat will know you did so twenty years from now as it¿s a permanent record .Fancy that?

Posted by: frankly fed up of melbourne 9:30am August 28, 2008

 

City- centric once again. Presumably consessions would be built in country drivers and even those in outer suburban areas otherwise such a tax would be yet another example of the way beauracrats in this state think Victoria consists only of the city and its suburbs.

Posted by: Robert of Woodend 9:27am August 28, 2008

 

All very well for people who can afford to live near & work in the city. There are a lot of people out here like me who would need to take a bus, two trains & a tram to get to & from work and it would take me two hours each way. As for buying a smaller car - who can afford to buy a new car?? Once again suggestions that are geared to help the better off in the community.

Posted by: Kate of Melton 9:12am August 28, 2008

 

 

This is not going to be easy change to introduce, regardless of how correct it is.

 

History is being made- Telsa is profitable

Tesla makes electric cars. Tesla makes very fast sports cars. It is the same cars.

Tesla is a start-up motor manufacturer. Tesla is profitable. It is the same company.

Tesla is full of paradoxes. It is utterly significant that they are making a profit already on revenue of only $20m. They made new cars from almost scratch. The percentage of the car that is new is over 90%. And it is an electric car that leaves Porche in the dust!

A press release from the Tesla site given below. The most remarkable quote from the press release is: "The highly acclaimed Roadster -- faster than a Porsche and twice as energy efficient as a Toyota Prius – is the only highway-capable electric vehicle for sale in North America or Europe."

The only highway-capable electric car that is faster than a Porsche and twice (yes twice) as energy efficient as a Prius!

I want one.


The press release is below. The original is on this link:
Tesla Motors attains profitability milestone
Electric vehicle manufacturer achieves record deliveries in July and will significantly expand in Europe this quarter.

August 7, 2009

SAN CARLOS, Calif.--(BUSINESS WIRE) —Tesla Motors attained a significant milestone in July when it achieved overall corporate profitability with approximately $1 million of earnings on revenue of $20 million.

Tesla reached overall corporate profitability while continuing to develop the all-electric Model S sedan and opening regional sales and service centers. Profitability arose primarily from improved gross margin on the Roadster 2, the second iteration of Tesla’s award-winning sports car.

Tesla shipped a record 109 vehicles in July and enjoyed a surge in new Roadster purchases. In the third quarter, the privately held company will make significant deliveries to European customers while expanding its presence in several countries.

“We achieved a bottom-line profitability thanks to a tremendous amount of hard work by the Tesla team to improve quality, while simultaneously reducing costs on the Roadster,” said Tesla CEO and Product Architect Elon Musk. “This also shows that there is strong demand for a car that is unique in offering high performance with a clean conscience. Moreover, customers know that in buying the Roadster they are helping fund development of our mass market electric cars.”

The highly acclaimed Roadster -- faster than a Porsche and twice as energy efficient as a Toyota Prius – is the only highway-capable electric vehicle for sale in North America or Europe. It’s the first production EV to travel more than 200 miles per charge and the first US- and EU-certified Lithium-Ion battery electric vehicle. With an estimated range of 244 miles per charge and zero tailpipe emissions, it offers supercar performance with a clean conscience.

The Roadster 2, which Tesla is building and shipping to customers now, features an array of enhancements. Those include a more powerful heating, ventilation and air-conditioning system, more comfortable seats and a more luxurious dashboard and cabin.

Last month Tesla began delivering the Roadster Sport, an even higher performance car that does 0 to 60 mph in 3.7 seconds, compared to 3.9 seconds for the standard Roadster. The Sport includes a more powerful motor, custom-tuned suspension and forged wheels. A customer’s Roadster Sport sprinted the quarter-mile in 12.643 seconds in late July, setting a class record in the National Electric Drag Racing Association.

Financing Now Available

Last month, Tesla announced Roadster financing through Bank of America. Financing means the Roadster can have lower total monthly costs than a gas-guzzling sports car with a similar sticker price. Prospective customers may complete loan documents in Tesla’s showrooms or online.

The Roadster is six times as energy-efficient as comparable sports cars – yet it does not require routine oil changes or exhaust system work. Roadsters have far fewer moving (and breakable) parts than internal combustion engine sports cars, which need replacement such as spark plugs, pistons, hoses, belts and clutches. The Roadster costs roughly $4 to fully recharge – a bargain even when gasoline costs less than $1 per gallon.

Tesla sells cars online and at showrooms in California (Menlo Park and West Los Angeles), New York City, Seattle and London. Tesla is rapidly expanding its network of showrooms this summer with stores in Chicago, South Florida, Washington DC, Toronto, Munich and Monaco.

Tesla has developed an industry-leading mobile service team, including highly skilled technicians who make “house calls” to customers’ homes or offices in every region where Tesla sells cars. Electric vehicles have far fewer moving (and breakable) parts than internal combustion engine vehicles. They qualify for federal and state tax credits, rebates, sales tax exemptions, free parking, commuter-lane passes and other perks.

Tesla, which in June won Department of Energy approval for $465 million in low-interest loans, is deep into the development of the Model S. The all-electric sedan will have a base price of $49,900, roughly half the price of the Roadster. Reducing unit cost on the Roadster is helping Tesla to bring the Model S to market at a vastly lower price point, paving the way to mass-market EVs for mainstream buyers.

In addition to the Model S program, Tesla is jointly developing an electric version of the popular Smart car with Daimler. The first of an initial test fleet of 1,000 electric Smart cars are expected to be on the road in late 2009.

New Pay How You Drive product in the UK

A new PAYD product went live recently. The website is payhowyoudrive.co.uk.

The pricing is based on how you drive as opposed to how far you drive. They are targeting people who struggle to find car insurance otherwise, and younger drivers.

A few comments after having only spent a few minutes on the site:

• The car insurance product incentivizes safe driving behaviour, which is good.
• The driving is scored using a points based system.
• You can lose your car insurance policy, much like losing your license on the Australian demerit point system if you get to 12 points. Not sure how that works legally, but the contract probably has safe driving as an underwriting condition.
• Points drop off after time, again similar to the Australian driving license demerit point system.
• You buy miles in mileage bands, by agreeing to maximum mileage. That means you declare up front how much you’re going to drive, and then get penalty points if you do more than that. I assume you pay more for higher mileage bands. The mileage bands available are 3,000, 5,000, 7,500, 10,000 and 13,000 miles.
• You get penalty points for fast driving, going over your stated mileage band, and driving too much at night (more than 10% of your mileage band).
• Quite amusingly, if you get to 12+ points you have 7 days to “appeal” against your policy being taken away. Would love to see how that fits into the British arbitration system!

What is good about the product:

• It links insurance cost to driving behaviour, which should improve how people drive.
• People can get feedback on the site on their historical behaviour.

What can be better:

• The product is still quite complicated. I am not sure how it can be made simpler, but it is not all that easy to understand.
• The penalty points are for a small set of behaviours only.
• It is not explicitly linked to mileage driven, but rather implicitly through the bands.
• The telemetry device needs to be installed, and collects location data.

All in all, it is good to see another Pay As You Drive product go live, and we wish them well!

Advertising Pay As You Drive

Pay As You Drive is a great car insurance product. And we’re very biased, I know, but it saves serious money on car insurance for people who drive less than average, and fairly so. At Real Insurance we have had hundreds of thousands of people getting car insurance quotes from us over the last year since we launched. Also, if I look at people talking about PAYD on discussion forums, then it is clear that people “get it”. They understand why the product is a fairer way of doing car insurance, and that is why they call us for car insurance quotes.

An interesting challenge that we have had to solve is how do we advertise the product? How do you explain that this is better car insurance for some people, and that they should call us to get a car insurance quote from us? How do you do that in 30 seconds?

Our latest ads use a device of showing one car driving a lot, and another car driving very little (and sitting in the garage for most of the time). The premise being that if you drive less, you have less chance of being in an accident, and therefore your car insurance quote should be less than for traditional car insurance. I think it is pretty effective. It amazes me to see how much our marketing team can get into a 30 second car insurance TV ad. A version of our latest ad is below. Please let us know what you think by commenting below!

New proposed Pay As You Drive Regulations in California

The Commissioner of Insurance in California has put out a second round of regulations around Pay As You Drive car insurance in California for comment. The regulations are pretty good, and allow for a wide range of designs of car insurance products using mileage as a rating factor.

Some highlights:

1. The regulations allow for the product design that we have in Australia. We’re quite flattered by that! It is good to know we could serve as an example for California!
2. The regulations allow for a wide range of ways in which to monitor mileage, including telemetry (tracking devices). The devices are NOT allowed to track location though.
3. The regulations stop short of mandating insurance companies to HAVE to provide PAYD. This will no doubt disappoint some of the strong advocacy groups. The Multiple Prisoner’s Dilemma will make uptake slow, regardless of the regulations.

The one aspect of this that I still don’t understand is the vehement objections that are made against privacy violations. The regulations prevent location tracking, which I understand, and which I think protects both the consumer and the insurance company.

There are however people who object against driving behaviour being captured. Why would that be? Can someone enlighten me? Why would we as a society not want to know who drives irresponsibly, and why should the rest of us be paying extra insurance for people who drive like hoons?

In one of the responses to the regulations, Andrew J. Blumberg (Stanford), Lee Tien and Peter Eckersley, says the following:

“We believe that it makes no sense to permit the use of any “technological device” without making clear what it does or does not collect. It is our understanding that commercially available devices gather significant information about driving behavior, such as braking, swerving and acceleration. We fear that the “innovation” and “attendant benefits” of a verified actual mileage program lie not in greater accuracy in verifying annual miles driven but in the collection and exploitation of information that does not relate to actual mileage. This fear is amplified by the fact that insurers may use “[i]nformation collected by a technological device” to “calculate automobile insurance rates,” which is entirely different from verifying actual mileage. Mileage verification should not be used as a subterfuge for collecting other information about drivers. Furthermore, the text does not specify adequately controls on the use and dissemination of the information collected. To this end, we recommend the following specific changes to the proposed regulations:

The technological device will be used only to collect the verified actual mileage, and no other information. In particular, it will neither collect nor store nor transmit information about the position, velocity, or acceleration of the vehicle.”
Original link here.

Why should we be sensitive about that?

For interest, the actual regulations have the following three product descriptions in them:
1. Time Basis Policy. All coverages are offered for a set time period. If the block of miles purchased by the insured expires and the insured does not purchase additional miles, all coverages will continue to the end date of the policy. However, this does not relieve the insured from any obligation under the terms of the policy to pay for miles driven in excess of the purchased block. The price per mile for miles purchased after expiration of the mileage block may be greater than the price per mile for miles purchased before expiration of the mileage block, if the insurer establishes an actuarial basis for such differential pricing and the Commissioner approves the differential pricing in the insurer’s rate or class plan application.

2. Hybrid Time Basis and Miles Basis Policy, with notice of expiration provided at time of policy purchase. Automobile liability coverage is offered for a set time period. If the block of miles purchased by the insured expires and the insured does not purchase additional miles, all coverages other than automobile liability coverage will expire, provided the insurer gives notice pursuant to California Insurance Code Section 663. An insurer may comply with the notice requirements of California Insurance Code Section 663 if it gives notice to the insured at the time of purchase of the policy that specified coverages other than automobile liability coverage will expire upon exhaustion of the purchased miles. Such notice shall be effective only if the insured agrees in writing at the time of purchase of the policy to the terms of the notice and acknowledges his or her understanding of the consequences of exceeding the purchased miles.

3. Hybrid Time Basis and Miles Basis Policy, with notice of expiration provided at time the insurer determines that purchased miles have been exhausted. Automobile liability coverage is offered for a set time period. If the block of miles purchased by the insured expires and the insured does not purchase additional miles, all coverages other than automobile liability coverage will expire, provided the insurer gives notice pursuant to California Insurance Code Section 663. An insurer may comply with the notice requirements of California Insurance Code Section 663 if it gives notice to the insured at the time the insurer determines that the purchased miles have been exhausted. The coverages subject to expiration will expire 30 days following the insurer’s notice (in the case of nonrenewal) and 20 days following the insurer’s notice (in the case of an offer of renewal), unless the insured purchases more miles.

Insurance and innovation

An article recently compared a BusinessWeek innovation list with innovation in insurance (see the article below). The writer, Chad Mitchell, makes the case that there are innovation in motor insurance in particular, it is just not noticed, and that more innovation will follow.

I agree with Chad. It is frustrating that insurance innovation is not noticed. It is even more frustrating in Australia than it is in the US. In fact, at Real we have two the three innovations Chad mentions in his article. We launched the world’s first trust-based Pay As You Drive car insurance, and Australia’s first Pay As You Drive car insurance. Our products have highly customisable cover, and you can optimise your premium to what suits you (within a framework of course).

If there are any notable innovations in the insurance space, particularly the personal lines insurance space, please comment on this posting, and let us know what you think!

Insurance and Innovation: An Oxymoron?

By Chad Mitchell July 8, 2009

Awhile back I wrote about the evolution of social media strategy for insurers. The premise of the blog was how insurers effectively use social media to improve customer service and help agents.

The topic of social media is a microcosm of a bigger question I commonly receive from insurance executives: Can insurers and other financial services firms innovate?

Innovation within insurance is stifled because of the extremely challenging regulatory environment. Individual state legislation, product restrictions and widely varying consumer regulations often deter insurers from investing in new products, pricing, promotions and services.

There is proof, for the naysayers, that innovation remains a myth for insurers and financial services providers. Business Week annually ranks the Top 50 Most Innovative companies around the world. Not a single insurer or financial services firm appears in the ranking (except for Citigroup). I don’t believe the report card tells the entire story though. Yes, insurers may never offer the next iPhone or Dyson vacuum, but the track record for innovation is growing.

Just look at a few examples of innovation from insurers over the past few years:

• Telematics and pay-as-you-drive insurance. Progressive leads the pack offering an array of innovative products and services. The firm uses telematics to offer customers a novel concept— a car insurance policy based on how well and how much you drive. Progressive’s MyRate pay-as-you-drive product is a behavior-based car insurance policy that lets drivers lower their premiums based on how they drive. Drivers receive a small wireless device that plugs into a port in their car and measures how, how much and when the car is being driven. Cars driven less often, in less risky ways and at less risky times of day can receive a lower premium.

• Price comparisons and “name your price” solutions. Priceline.com built the business model for name-your-price travel. And Progressive seized the opportunity to innovate within insurance. Progressive currently promotes its Name Your Price service that allows customers to set a budget for auto insurance. Then Progressive builds an auto policy to fit the customer’s needs and wallet. Progressive and Esurance also innovate by offering customers competitive price comparisons at their Web sites. A customer can see a Progressive or Esurance quote along with two to four competitors’ prices. This creates transparency for customers who are seeking the best coverage and lowest possible price.

• Mobile applications and the iPhone. Apple topped Business Weeks’ list as the most innovative company in the world. The company continues to dominate the MP3 market with the iPod, and is making waves in the mobile category with the iPhone. The iPhone is only used buy a small portion of mobile U.S. customers (around 5%), but the penetration of smart phones continues to grow exponentially. Nationwide jumped on this growing segment, and was the first U.S. auto insurer to develop a claims application for a smart phone. The firm released its new iPhone application, available to Nationwide and non-Nationwide customers, that lets policyholders file a claim, take pictures of accidents and manage the claim process through an iPhone application.

These examples may not grab headlines or put any insurers in Business Week’s most innovative ranking, but I believe innovation is happening right now. I speak every week with leading insurers who are evaluating amazing new innovations.

Most innovations are related to integrated online experiences that give customers the opportunity to build a personal risk and financial inventory. Customers will soon have online, mobile and social applications with rich tools, calculators, real-time pricing and online advice software to help them optimize their insurance and investment portfolios.

These integrated experiences will incorporate budgeting, banking and payment solutions normally found through traditional retail banks or investment brokerages.

Human resources and hiring trends are also improving the odds for innovation within insurance. Insurers are hiring senior IT, eBusiness, marketing and product executives from outside the industry. This hiring trend brings new talent to traditionally conservative insurers and executives with proven innovation performance.

We will continue to see major strides in innovation in the next year as insurers deliver more customized products and services to policyholders. Innovation and insurance is no longer an oxymoron.

Original article here.

Some more Australian Press Coverage

Since we launched Real Insurance Pay As You Drive® in Australia, we have had more good press in the US than in Australia. We are apparently known as “that Australian company”, and (somewhat insultingly…) I have been asked many times why our innovation happened in Australia first (as opposed to in the US). We believe we’re a world first. So we are quite glad when we get some attention in Australia.

Jordan Chong wrote an article for AAP recently, which was published (without any vetting from us beforehand) quite far and wide in our terms. The article is included in the post below. Or you can view an example of the article online on this link.

Mr. Chong helped to generate some more publicity around PAYD – and that is a good thing. However, we did not see the article before it was published. This means there are some comments in the article that are not exactly right, so for good measure, you should note that:

1. None of the comments in the article were actually made by or for the Institute of Actuaries of Australia (Institute). Instead, the comments were made by Colin Priest in the context of an earlier presentation he made to the Institute. .

2. You can buy any number of kilometers on Real’s PAYD. The minimum is 5,000kms (as opposed to being sold in 5,000km blocks).

3. Real does verify the odometer of the vehicle in case of an accident, or when unused kilometers are to be refunded. It does not verify the odometer when the policyholder takes out the cover.

A related press release is also on this site, at this link.

Jordan Chong’s article:

Change to car insurance nets big savings

July 3, 2009

Basing the cost of car insurance on how far you drive can save people money and help the environment, a study says.

An analysis by the Institute of Actuaries of Australia found there was a potential saving of $3.2 billion per year if the cost of maintaining a vehicle was more closely linked to the number of kilometres driven.

One way of doing this was through pay-as-you-drive (PAYD) insurance, where the cost of the policy was based not only on the usual factors - driver age, gender, location and vehicle type - but also on how much the car was used.

The only provider of PAYD car insurance in Australia is Real Insurance, which has been in the market for about 12 months and sells insurance in 5000-kilometre blocks.

Real Insurance chief executive Roger Grobler said more than half of policy holders purchased the minimum 5000-kilometre option.

"If you're not using your car, you can't be involved in an accident," Mr Grobler said on Friday.

"The more you drive, the more the probabilities are of you being involved in an accident and the more your insurance should cost.

"Traditional insurance just doesn't work that way."

The Institute of Actuaries of Australia said the $3.2 billion annual saving - which equated to about $304 per vehicle - did not only flow to motorists in the form of lower insurance costs.

Cities and governments also benefited as fewer cars on the road meant fewer accidents, less congestion and reduced demand for road maintenance, as well as cleaner air through less pollution.

The findings were presented at the institute's biennial convention in April this year.

"Australians drive too much because much of the costs of driving are not paid directly by the driver or owner," the institute's Colin Priest said in a presentation at the convention.

"We estimate Australians will drive seven per cent fewer kilometres if Australia switched to PAYD."

Mr Grobler said a very small reduction in the extent to which people used their cars would have a "massive impact both for individuals and for society".

A financial analyst at Canstar Cannex, Joshua Zenas, said those with PAYD insurance had to keep track of how many kilometres they were logging.

"You need to be exactly aware of where you stand and how many kilometres you are left with," Mr Zenas said from Brisbane on Friday.

"That extra burden is there on a driver."

Mr Zenas said those who were not heavy drivers could potentially benefit financially from the PAYD method.

"There is a substantial level of savings based on the type of driving you do," Mr Zenas said.

Some PAYD providers overseas used annual odometer checks or installed a device in cars to keep track of driving distance, but Mr Grobler said Real Insurance did none of these things.

"It's based on a trust principle, there's no monitoring," Mr Grobler said.

Mr Grobler said PAYD insurance was available in the US, Canada, Japan, South Africa, India and parts of Europe.

The average motorist drives about 14,600 kilometres annually, according to figures from the Australian Bureau of Statistics.

Write-up on the PAYD talk at Accord Loma Conference

The talk on PAYD I did was written up in the National Underwriter. Quite scary how a Powerpoint presentation (actually Keynote, it is just a lot cooler...) is written up like this... Speed of information is incredible.

Original on this link.

Insurers Looking Beyond Pay-As-You-Drive Face Risks, Says Expert
ORLANDO, FLA.—Insurers may face new transparency obligations and regulatory challenges as they explore pay-how-you-drive and pay-where-you-drive insurance coverage, an insurance executive advised here.

Those new conundrums, where insurers gain knowledge of dangerous driving activity, were voiced by Roger Grobler, CEO of Australia-based Real Insurance, speaking at the ACORD-LOMA Insurance Systems Forum.

Already, insurers offering pay-as-you-drive auto insurance with rates based on how many miles a vehicle is driven have sparked some concerns about privacy where monitoring devices inside cars are used to track this information.

Mr. Grobler, whose company has a pay-as-you-drive program, said this problem can be avoided because insurers can also collect mileage information through periodic odometer inspections and other methods to avoid these privacy worries.

Mr. Grobler said Real Insurance uses a trust-based system for tracking mileage. Customers purchase coverage based on how many miles (kilometers in Australia) they plan to drive for the coverage period.

If the driver has an accident during the coverage period, and the odometer reading is above the purchased amount of miles, the claim is not covered, Mr. Grobler noted.

While buyers could conceivably roll the dice under this scenario, Mr. Grobler said most consumers want to know they’ll have coverage in the event of an accident.

Mr. Grobler said while pay-as-you-drive determines how many miles a person is driving, it does not identify if a person is driving poorly. For this reason, Mr. Grobler said Real Insurance is looking into a pay-how-you-drive program.

Under this program, a telematic monitoring device (not a GPS system) would reveal how the car is driven as well as miles. It would capture information such as speed, the rate of acceleration and deceleration, and time of day a vehicle is driven.

Mr. Grobler cited Progressive as a U.S. insurer using a pay-how-you-drive system.

The concept, he added, could promote safe driving as customers who know, for example, that the system is capturing whether they are driving during higher-risk hours between 11 p.m. and 5 a.m. may decline to do so.

A system such as pay-how-you-drive could also change the way insurers view rating factors. Mr. Grobler said with the type of data captured, insurers can see if an 18-year-old is driving more like an experienced driver, and if so, that 18-year-old can be rated similar to an experienced driver. Conversely, if a driving veteran is operating like a reckless 18-year-old, rates can reflect that as well.

Pay-how-you-drive, and the information it captures, is also less of a privacy concern than another concept: pay-where-you-drive, Mr. Grobler said.

Under pay-where-you-drive, a GPS system captures all driving information, including where an insured is at a given time. This system, Mr. Grobler said, is “quite invasive when it comes to privacy.”

He said it can raise questions as to a carrier's possible legal obligations and exposures when, for example, its data reveals that a policyholder is speeding though a school zone every day. He asked: Is the insurer obligated to inform law enforcement, and can the insurer be held liable if the insured strikes a child one day in that school zone?

How these pay-as/how/where-you-drive programs are treated by regulators and adopted by insurers remains to be seen. Progressive’s MyRate program, for example, is currently available in only 10 states.

Insurers may be reluctant to adopt such a program because their systems may be based on the current methods of evaluating risk, Mr. Grobler noted. Starting a new pay-as-you-drive program may require a lot of changes.

Milemeter's Chris Gay speaks at Ceres Conference

The following article appeared on EarthTimes following a Ceres conference on PAYD, where Todd Litman and Chris Gay spoke. It is good to see trust-based PAYD get some air time!

Original article on this link.

MileMeter Founder Featured as Expert on By-the-Mile Auto Insurance
DALLAS - (Business Wire) A select group of auto insurance regulators, environmentalists, consumer advocates and auto insurance executives recently gathered at the 2009 Ceres Conference to hear three industry experts outline the benefits of pay-as-you-drive (PAYD) insurance.
“Pure mileage-based insurance is a unique product that is equitable, environmental and responsible,” said MileMeter President Chris Gay, during his presentation.

Gay, founder of Dallas-based MileMeter, was invited to weigh in on by-the-mile insurance because MileMeter continues to be the first and only company in the nation offering by-the-mile insurance without installing tracking devices that raise the cost of insurance, violating consumer privacy.

"MileMeter offers the best Pay-As-You-Drive policies currently available in North America. It’s easy to use, affordable and gives motorists the maximum possible incentive to reduce their annual mileage," said one of the panelists, Todd Litman, founder and executive director of the Victoria Transport Policy Institute.

“MileMeter is setting the standard for the entire industry by directly servicing overcharged and underserved drivers,” Gay noted. “If MileMeter does its job well, other insurance companies will soon follow our lead so that Texas drivers aren’t the only ones benefiting.”

Working to address challenges such as global climate change, Ceres acknowledges that PAYD insurance is one way to provide consumers with an economic, green incentive to limit miles driven and receive a reduced rate in current policies while simultaneously helping the environment. Consumers respond to incentives, and with appropriate incentives Ceres argued governments and corporations can encourage more sustainable, responsible consumption.

During the presentation, Gay also outlined how MileMeter’s transparent pricing creates the most effective auto insurance incentives to reduce vehicle miles traveled (VMT). MileMeter’s radically different business model allows motorists to greatly reduce insurance premiums simply by driving fewer miles. For those driving up to 10,000 miles per year, expected savings can average 25 – 75 percent on most policies.

Gay explained, “MileMeter’s by-the-mile auto insurance is convenient, customizable and rewards good social and environmental behavior. The obvious consumer benefit is cost savings but PAYD auto insurance also spurs fewer miles driven on the roads, leading to fewer tailpipe emissions and traffic injuries, less toxic road runoff, and less demand for road and parking lot construction, which helps reduce urban sprawl, improve air quality and fight climate change.”

CNN Article on Pay As You Drive

An interesting article appeared on the CNN site last Friday (22 May) by Bengt Halvorson.

It deals with a number of the issues facing telemetry based Pay As You Drive.

1. Observing behaviour changes behaviour. This is a great benefit for a box in the car that observes how people drive.
2. Privacy is a major concern, especially with a box that tracks where you drive.
3. The article is critical about Progressive's MyRate's lack of differentiating between cars that behave differently. I'm not sure that is fair. If a driver accelerates or decelerates faster or slower, it has an impact on the risk of having an accident.
4. The article says Allstate, Unigard and Hartford are testing usage based policies!

The article is reproduced below. The original is on this link.

Car insurance savings come with 'Big Brother'
(AOL Autos) -- Tim Goodwin doesn't spend much time behind the wheel of his 2004 Chevy Tahoe. Even though he only covers about 3,000 miles per year -- using it just for weekend trips -- he had, until recently, been getting no special deal on his insurance for driving so little.

Six months ago, the Springfield, Missouri, property supervisor found a policy that gives him a break. So far he's saved about $48 -- or ten percent -- over six months compared to a traditional premium.

There's a catch; his insurance company, Progressive, is monitoring every move he makes behind the wheel.

Goodwin is fine with it, and says that just knowing that a small transceiver is reporting his driving behavior back to the insurance company helps him drive more carefully.

"There's this 'Big Brothe'r thing, but it's good," Goodwin said. "Since I know I'm being watched, I'm on my best behavior." AOL Autos: Check out other Big Brother devices

Goodwin noted that he's now less likely to speed.

"You'll, in effect trade a degree of privacy for a lower rate" in such a pay-as-you-drive policy, explains Mike Barry, vice president of media relations for the Insurance Information Institute. "They know not only how many miles you drive but how and when you drive."

For now, MyRate is the only widely available pay-as-you-go auto policy -- available now in nine states (Alabama, Kentucky, Louisiana, Maryland, Michigan, Minnesota, Missouri, New Jersey, and Oregon), with at least three more expected by the end of the summer.

There are "tens of thousands" of drivers already enrolled, according to Progressive, and one in four existing customers of the company who've become eligible for the program have opted in.

Progressive says that MyRate may save up to 25 percent versus a traditional premium if you travel less than 10,000 miles per year, are a defensive driver, and rarely drive past midnight.

What bad behaviors does the system look for? Sudden starts and stops, and driving during higher-risk times, will raise the rate -- by up to 9 percent in states where a surcharge is permitted.

Progressive says that if you drive even once a week between midnight and 4 a.m. the policy probably isn't a good choice. On the flip side, smooth rural drivers who cover more than 15,000 miles a year could also save 20 percent or more. AOL Autos: Can your car last 1 million miles?

Several other insurers, including Allstate, Unigard, and The Hartford, are testing usage-based policies; and GMAC Insurance now offers a low-mileage discount of up to 54 percent to drivers of late-model GM vehicles -- with mileage reported by the onboard OnStar communication and safety system.

Another company, MileMeter, offers a system (only in Texas) through which customers pre-pay for a certain number of miles of coverage, as verified simply through the vehicle's odometer reading. AOL Autos: How to cut your insurance in half

In various forms, pay-as-you-drive policies are already offered in Canada, the U.K., Japan, Israel, the Netherlands, and South Africa, but for now the wider adoption of such policies in the U.S. has been slowed by the differences between in requirements in each state.

Why so long coming?

Tully Lehman, a spokesman for the insurance industry in California, a state that has recently laid the framework for pay-as-you-drive policies, says that the biggest concern with surveillance-based systems like Progressive's is privacy.

But there are also worries with the misinterpretation of the driving-style data.

"For instance, when the company sees hard braking," it could be driver inattention or carelessness, Lehman said. "Or, it could be a dog in the road." It also could be any number of things that have nothing to do with the driver's behavior.

Another issue is that the very vehicle you drive might not qualify you for much of a discount if it has touchy brakes or spirited acceleration; the company doesn't correct for the fact that some cars are more "responsive" than others. A Buick driver, for instance, might get more of a discount than a Mini Cooper driver simply because of the way the vehicles respond. MyRate doesn't differentiate between drivers, either.

MyRate users are able to log in and see an assessment of their driving style, along with charts and graphs and a running trip record.

While privacy advocates might already be up in arms over the data set -- which won't be shared with third parties but could be kept for up to six years -- they'll be somewhat relieved to hear that MyRate doesn't have GPS capabilities. The system knows "when" and "how" you drive, but not "where." For that, we'll leave the controversy to the GPS locators in cell phones.

Tracking exactly where users go would create serious privacy concerns, admits Steve McKay, product manager for MyRate

"Knowing location wouldn't add a lot to the predictive value either," McKay said.

The state of California in 2006 outlawed the pricing of policies by zip code, along with several other factors.

Although the future of pay-as-you-drive plans might rest in GPS-based systems that do track where you go, it's now looking like a distant future. California has also recently adopted new regulations that set the framework for pay-as-you-go policies, but the state's insurance commissioner, Steven Poizner, is especially conscious of the privacy concerns that the technology brings.

"I will not approve any auto insurance policy that aims to utilize GPS devices in order to obtain location data from consumers," Poizner said in a release last year.

State and federal governments also have their eye on GPS systems as a new way of figuring road tax in the future. With the projected long-term market swing away from conventional gasoline vehicles toward more efficient plug-in hybrids and electric vehicles, many state officials are worried about dwindling revenue for highways.

Currently, road taxes are collected via a per-gallon gasoline tax. Just earlier this year, U.S. Transportation Secretary Ray LaHood proposed a mileage-based method for calculating road tax, and several states, including Oregon, have tested a GPS-based system that would assess road tax.

Nudges drivers to be safer and greener

Drivers might simply choose pay-as-you-drive policies to get a break on their premium. But it'll likely save them even more in the long run; because they'll probably drive their cars gentler, get better gas mileage, put less wear on their vehicles, and be less prone to getting tickets.

"Just leaving the device in your car changes your behavior," Allstate spokesman Raleigh Floyd said. Because the company is scoring the driver's actions and there are measurable rewards for good behavior. "It becomes more game-like--and the benefit is that you're a safer driver." AOL Autos: How to avoid a speeding ticket

Even Goodwin admits that he finds restraint in his Tahoe when he wouldn't have before.

"Now when I just want to floor it, I don't," he said.

They're likely to reduce their trips as well. According to a report from the Brookings Institution, if motorists paid for their auto insurance by the mile, driving would decline by about eight percent nationwide, significantly reducing carbon-dioxide emissions and gasoline consumption, and nearly two-thirds of drivers would pay less for auto insurance. AOL Autos: How to get 100 MPG

Major environmental groups and safety advocates are also on board; the ten-percent decline in driving anticipated by the Environmental Defense Fund would not only reduce air pollution and toxic runoff but also translate to saved lives, through a 17-percent reduction in crashes.

Even Progressive agrees that a pay-as-you-drive policy won't be right for everyone. Those who value their privacy or want to drive however they please can rest assured; there will still be traditional policies for the foreseeable future, experts say.

But if you're willing to take your insurer along for the ride, you might soon have a lot of money-saving options.

Accord Loma Conference May 2009

Exigen Insurance Solutions invited me to speak at the Accord Loma Conference in Orlando Florida. The slide pack is uploaded below. The full talk will be available on the Accord Loma conference site in about a week's time, including audio and the questions afterwards.

What was interesting in terms of the questions afterwards:

1. The focus is strongly on telemetry / device driven Pay As You Drive.
2. The concept of the Multiple Prisoner's Dilemma struck a chord with the audience. It is a real problem.
3. The design of our Real Insurance Pay As You Drive also received a lot of attention.

Changing the world, all at once!

Shai Agassi is the kind of guy that makes you think of the famous Margaret Meed quote: "Never doubt that a small group of thoughtful, committed people can change the world. Indeed, it is the only thing that ever has."

In a really mind-blowing TED talk he talks about his vision to change transport in one big swoop to electric cars. He compellingly talks about figures having to be either infinite, 100% or 0%. No half measures. He says that Kennedy did not say the US will take man 20% of the way to the moon and then have a 20% chance of bringing him back. It was an absolute undertaking.

Similarly, in terms of environmental measures: Stop talking about half measures. Start talking in absolutes. Decide to solve it 100%. Make it infinitely scalable. Have 0% of the emissions we have today.

In the talk he explains his thinking that for electric cars to work (using today's technology) you have to think about the solution outside of just the car. So don't solve the problem inside the car only. Make the environment adopt the car. That means charging stations wherever a car can be parked. It also means replacement batteries at something that resembles a mix between a gas station and a car wash.

From the talk he has Nissan-Renault's backing, as well as Israel and Denmark as countries to do it in. Inspiring stuff!

It is worthwhile to listen to, and made me think: What lies ahead for insurance? What impact does this wholesale change to private transport in a country do for the car insurance industry in that country? Worthwhile to ponder.

Shai Agassi has been named by Time Magazine as one of the world's most influential people.

His business is appropriately called "Better Place".

The TED talk is on this link: TED

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.

Julian Beardsworth from EMB gives 10 reasons to switch to telematics

EMB is starting to be a commentator on Pay As You Drive. Julian Beardsworth (bio) posted a news item on their website recently that gives a good old fashioned list of 10 of making the case for telematics. It is a good list (I particularly like point 5...):

Ten reasons to switch to telematics
When Norwich Union put its pay-as-you drive insurance scheme on hold some observers concluded that it was just one of those ideas, like the hovercraft, that catch the imagination but ultimately disappoint. Julian Beardsworth of EMB thinks otherwise. He believes that telematics-rated motor insurance is inevitable, desirable and will appeal to customers. Here are his ten reasons why

1. It works
All drivers can spot high-risk driving both in themselves and others. Reckless, unskilled and over-cautious driving are dangers that can be observed every day. So it’s hardly surprising that using telematics to monitor when, where and how we drive can differentiate high-risk from low-risk drivers to a remarkable degree. Norwich Union reported a 30% drop in claims costs for telematics, which implies that it doubled the quality of risk assessment. Any insurer having twice the ability of its competitors to underwrite and price risk can take the market by storm.

2. It’s getting cheaper and cheaper
Everyone is familiar with the reality of “Moore’s Law” that computer processors double in power every eighteen months. Similar observations have been made about data transmission capability and data storage. At the same time, computer costs are reducing in real terms. EMB’s observation is that telematics hardware and data transmission costs reduce by a factor of six every five years. A telematics device that cost £300 in 2003 could be delivered for £50 in 2008 and is heading for £8 in 2013. At some point soon the economics switch to “why wouldn’t you?” rather than “why would you?”.

3. DIY installation
Up to now the cost of installation has been prohibitive, but not any more. A solution has been found in the form of a device that is mailed to the customer and simply plugs into the OBD II port – a standard on cars sold in the EU since 2000.

4. DIY re-installation
And when people change their cars the telematics device unplugs from one and plugs into the other – it sounds trivial but is another massive shift in the economics of telematics.

5. Telematics doesn’t have to be invented in the UK
High-risk and low-risk driving look the same the world over. So, when an insurer cracks open telematics risk assessment in an insurance product in the US or Germany or South Africa, it could very soon migrate. Telematics technology could easily move into the “plug and play” space in the UK and everywhere else, and it would require little or no modification. It only takes someone somewhere in the world to make it work for it to come to the UK.

6. And that someone might just be Progressive in the US
Progressive may have already cracked it. Progressive are a focused motor insurer and one of the largest players in the US market. They’ve had two forays into telematics on a pilot scale, but now they’re rolling out a telematics product countrywide – authorised and selling in ten states and counting. Of course, they could be calling the industry’s bluff, but they have a strong track record of successful innovation. Insurers doing nothing about telematics today are effectively betting that Progressive will fail.

7. Customers like telematics
Safer drivers know who they are and will buy telematics so that they can benefit from their lower risk rating. The threats to privacy cited by politicians and the media are politically correct and perceived to be populist – but everybody knows that simply carrying a mobile phone already reveals your location. And the protection given to data by law is something that no commercial enterprise can afford to let slip. How many times have details about the location (as opposed to the content) of a mobile phone call made for embarrassing headlines? I can’t remember a single instance.

8. It makes driving safer
People drive more safely when they are being monitored. The evidence so far is that cars with telematics have fewer accidents. The very fact of being observed brings about improvement. I’ve had telematics in my own car and, yes, it changed the way that I drove.

9. It decommoditises motor insurance and improves customer relationships
Individual customers will ultimately get individual prices with telematics insurance products, using personalised data. And the way that customers are identified as suitable for telematics will encourage behavioural and values-based marketing. This offers insurers a platform on which to build stronger customer relationships.

10. It cuts claims costs
Having details of the time, speed and driving actions can help claims handling. Fraudulent whiplash claims from third parties have been successfully challenged by demonstrating that the collision was at a snail’s pace. Stolen vehicles can potentially be tracked down. Disputes over liability will be simplified.

Julian Beardsworth is a director at EMB, the actuarial and business consultants.
Julian.Beardsworth@emb.com

Some other EMB posts:

1. Telematics' time is coming

2. Telematics in the fast lane (a briefing paper)