Fourteen auto insurers by the end of 2009 say they will be offering pay-only-as-you-drive policies, which base rates primarily on miles driven, according to a San Francisco-based technology firm's survey.

The poll by Exigen Insurance Solutions found the Pay As You Drive coverage is drawing increasing interest from some drivers and public policy advocates who see it as a green product because it creates an incentive to drive less.

Interest among motorists has come from low-mileage drivers who see it as a way to save money, the firm said.

As a result, Exigen reported, some U.S. insurers are moving fast to introduce PAYD products. But others, the technology firm noted, are still taking a cautious approach.

Exigen's survey, based on a series of polls of 163 insurance company representatives from 91 companies who attended a Nov, 5 webinar on PAYD insurance, showed 59 percent of the representatives said their companies have investigated or considered offering a PAYD product.

Two insurers said they would be offering a product by mid-2009, and 12 insurers have plans to do so before the end of 2009, according to the survey.

Those looking into offering PAYD products cited protecting their book of business from competitors as the top reason.

Exigen said "entering a new market to grow revenue" ranked as the second most popular reason, followed by "entering the market to gain market perception as exercising corporate responsibility with a 'green' product."

The cost of implementing core systems was the largest barrier for insurers offering PAYD products, with 46 percent of respondents citing this concern, according to the survey. Additionally, 20 percent of respondents cited consumer privacy concerns, 18 percent pointed to the cost of telemetry devices, 14 percent mentioned state insurance regulations, and 4 percent said existing PAYD patent infringement was a concern.

Fazi Zand, vice president, marketing and business development for Exigen Insurance Solutions, said, "The results indicate that U.S. insurers are adopting a follow-the-leader approach to PAYD that is defensive rather than aggressive. They are clearly monitoring PAYD market developments closely, concerned that if competitors begin to offer a PAYD product they will have to act swiftly to protect their book of business."

He said the survey results also reflect Exigen Insurance Solutions' belief "that implementation of agile technology is essential if insurers plan rapid new product introductions, such as PAYD programs. PAYD challenges existing systems to incorporate new rating factors and business processes."

Exigen announced in September that it had partnered with Real Insurance to offer Australian motorists a usage-based insurance product that allows them to pay only for the kilometers they plan to travel.

The Australian offering does not involve telemetry devices used to communicate odometer readings for PAYD products, which Exigen said were seen as costly for insurers and potentially invasive for consumers.

California Insurance Commissioner Steve Poizner recently promulgated rules to allow mileage-based policies as long as only mileage is monitored by any telemetry devices, citing privacy concerns.

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