A San Francisco-based technology firm has partnered with anAustralian insurer to create a "trust-based" auto policy based onmiles driven that involves no monitoring device attached to thevehicle.
|The new product offers low-mileage drivers a way to reduce theirauto premiums by lowering the technology barriers impeding theintroduction of "PAYD"--or "pay as you drive"--in world autoinsurance markets, according to Exigen Insurance Solutions, whichis partnering with Real Insurance (Australia) on theinitiative.
|Real Insurance, a part of the Johannesburg, South Africa-basedHollard Group of companies, offers Australian motorists ausage-based insurance product that allows them to pay only for thekilometers they plan to travel.
|Exigen became involved because its services were needed todevelop the complicated billing module that the new productrequires, as well as a different claims system, according to itsrepresentative, Kevin Haydon.
|Exigen said that "trust-based PAYD" differs from currentpay-as-you-drive systems in significant ways.
|"It does not require the installation or expense of a telemetrydevice that communicates driver behavior and odometer readings tothe insurer," the firm said. "As a result, it alleviates deepconsumer privacy concerns that amount to a privacy penalty forthose who want a PAYD product but do not want a monitoringdevice."
|California Insurance Commissioner Steve Poizner recentlypromulgated rules to allow mileage-based policies--as long as onlymileage is monitored, citing privacy concerns.
|"Motorists are changing their travel patterns to accommodate therising cost of gas, increased traffic congestion and environmentalconcerns," said a statement from Roger Grobler, chief executiveofficer at Real Insurance. "Against this backdrop, we felt it wastime to offer a PAYD product...[that does] not require a monitoringdevice by enabling customers to report odometer readings."
|Boston-based Tower Group released research in November 2007 thatprofiled PAYD implementation as "embodying two principles ofinnovation insurers must consider in their future plans--be agile,and be willing to accept risk," said Matthew Macauley, a seniorresearch associate at TowerGroup.
|"Most legacy policy administration and actuarial systems aredesigned with a heavy rating emphasis on insured vehicle year, makeand model. PAYD has completely altered this to mileage-driven," headded.
|Mr. Haydon said Real Insurance goes to great lengths to makedrivers understand they must report mileage accurately, and sendstext messages when their mileage is near to expiration.
|Karen Pauli, research director at Tower Group, said that so farProgressive is the one U.S. company offering some mileage-basedcoverage, but noted it involves a chip that "monitors drivingbehavior as well as mileage."
|She said the Norwich insurance firm in the United Kingdom had anoffering but "didn't get enough uptake," and some carriers inGermany are offering it.
|Interest in the coverage "will be peaked because of the gascrisis. Carriers will want to offer new rating plans, "shesuggested.
|Such policies, said Ms. Pauli, are very attractive to people whowork from home or live in a city with public transit.
|(To find out how the PAYD system works, see the accompanyinginfographic. More information about PAYD is available online athttp://www.exigeninsurance.com/about-exigen/news-events/payd-mediaroom.html.)
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