RAC unveils pay-per-kilometer auto insurance policy


RAC has launched a new flexible auto insurance policy, in which motorists are billed based on the kilometers they actually drive.

The Pay by Mile policy was designed for drivers who drive less than 6,000 miles per year and is described by the company as a “subscription” car insurance model.

Drivers pay a cost per mile for the kilometers they actually drive – called a mileage price – as well as a monthly fee to cover their vehicle when it is not in motion, called a parking price. There is also an initial activation fee of £ 50.

There is a Pay by Mile app, which means motorists can track how many kilometers they have driven and the likely amount of their monthly bill. There is no charge to change vehicle or address, and there is no link, drivers can cancel immediately if they decide the policy is no longer suitable for them or if they want to sell their vehicle. car.

Drivers who subscribe to the policy will receive a “drive tag”. This can be attached to the windshield, and the tag will detect when the car is in use and how many miles have been driven. No other data related to driving is collected. This data is then used to calculate the invoice at the end of the month.

All Pay by Mile policies are comprehensive.

Mark Godfrey, managing director of RAC Insurance, said the auto insurance market has been “ripe for upheaval” for some time, and argued that Pay by Mile was a “pioneer” product for those who don’t cover. not the great kilometers. .

He continued, “With a standard auto insurance policy, drivers have to estimate how many kilometers they expect to drive up front, whether or not they cover that distance in the year of. assurance. For people who do not drive very regularly or only cover short distances, this could result in a premium that seems too expensive.

Drive less kilometers

The pandemic has had a significant impact on our driving habits. The various national and local lockdowns have forced people to stay at home except in certain situations, and this has had an inevitable ripple effect on the number of kilometers traveled.

A Direct Line study at the end of 2020 suggested that more than half of drivers (55%) were driving fewer kilometers than before the introduction of the first lock. He pointed out that the estimated average mileage on an auto insurance policy is 8,000 miles, which equates to 667 miles per month, but as of October, the average motorist has driven just 198 miles.

Godfrey said: “The impact of the coronavirus pandemic on driving habits means it looks like this product has never been more relevant. Many of us drive fewer miles now, which means we might just be frustrated with how much we have to pay for auto insurance.

Some insurers have responded to reduced mileage – and therefore reduced risk levels as a result of the pandemic by partially reimbursing drivers for their policy costs. However, it was far from a one-size-fits-all approach, with only one in five drivers claiming to have received a refund.

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