Pay-How-You-Drive Insurance - Road Safety Benefits

A new approach to discourage speeding and other risky driver behaviour.

Car insurance companies are continually trying to improve their assessment of customer risk so that premiums can better match the likelihood of an insurance payout. In recent years several trials have been conducted. Initially these looked at distance travelled and other simple parameters. More recently the availability of on-board GPS systems and electronic data recorders has meant that the manner in which a person drives can be recorded and analysed. One highly successful trial was by Assoc Prof Stephen Greaves from the University of Sydney:

"Pay-How-You-Drive (PHYD) products being increasingly offered through the commercial insurance sector. While undoubted challenges remain, GPS technology opens up the possibility for developing greater equity in charging systems that reflect not just the kilometres driven but when, where and how they are driven...it has been demonstrated that it appears possible to significantly change aggregate behaviours (particularly speeding) of a segment of the motoring public through financial leverages based on incentivising positive changes in driving behaviour." (Analysis of a financial incentive to encourage safer driving practices)

That project used an on-board recording system developed by Smart Car Technologies that included a digital map of Australian speed limits (the basis of the SpeedAlert intelligent speed assistance system). The system can record incidents of exceeding the speed limit. The driving characteristics of participants were recorded before they were told about the purpose of the trial. They were then offered moderate financial incentives to reduce the kilometres driven, reduce night-time driving and reduce episodes of exceeding the speed limit. As indicated above, the results were remarkable, particularly for speeding.

It is estimated that significant reductions in serious and fatal crashes could be achieved if "low range" speeding was eliminated (Paine 2009 & CASR 2011) therefore an insurance system that encouraged compliance with speed limits would have major road safety benefits.

There will, of course, be a vocal group that opposes a "big brother" approach and deny that speeding is a road safety problem. They will simply miss out on the big insurance premium discounts that will be offered to people who elect to take part in Pay-How-You-Drive insurance. Indeed most of us are subsidising a reckless few under the current arrangements.

News

Other links (not endorsement)

Institute of Transport and Logistics Studies (ITLS) - Sydney University

Greaves, S.P., Ellison, A.B., Personality, risk aversion and speeding: An empirical investigation. Accid. Anal. Prev. (2011)

Devices to help drivers control their speed - Intelligent Speed Assistance (ISA)

inthinc Wins Best of State Award for Driving Safety System + inthinc Technology Used in Landmark IIHS Study on Teen Driving Safety

Pay How You Drive insurance (UK)

Young drivers 'pay how you drive' insurance unveiled by Co-op

'Pay how you drive' car insurance brought in for teens

'Pay how you drive' insurance launched

Pay As You Drive car insurance around the world - SaraFreeKm (SARA) – Italy’s PAYD uses a GPS device which relies on satellite data to calculate the exact kilometres driven.

In-vehicle driver behaviour technology is a fundamental component [of insurance]

TomTom enters insurance telematics market

Auto insurers in Europe may use black box technology to set rates

Betterdriver.com.au - AAMI has offered a 20% discount on car insurance for the first 1,000 customers who take up the BetterDriver™ Service (May 2012).

A National Strategy to Revolutionise Road Use - "The in-vehicle units would monitor each vehicles location, speed and acceleration using GPS, but they would send data to the central system only for safety, emergency, law enforcement and research..."

Ingenie - UK pay-how-you-drive insurance - "After a year with ingenie, on average the cost of our customers' insurance comes down by around 50% – that's an average of £800 cheaper." Ingenie won the 2013 Prince Michael Awards for Road Safety for Young Drivers

SKYEYE driving management system (Taiwan)

Traffic Injury Prevention: A One Year Pay-as-You-Speed Trial With Economic Incentives for Not Speeding - a PAYS concept is an effective way to reduce speed violations. Hence, it has the possibility to reduce crash severity and thereby to save lives. This could be an important step toward a safer road transport system. The majority of the participants were in favor of the concept, which indicates the potential of a new insurance product in the future. 

2017: Insure-the-box UK system with with Accident Alert - The in-tele-box fitted to your car can sense a strong impact on the car. When this happens, an alarm is activated in our Service Centre. If your car is stationary, we will try to call you to check you are OK and try to help you get going. If your car is moving we will assume you do not require urgent assistance.If we can’t get in contact and your car is not moving we will assess all the circumstances relating to the incident. If appropriate, we will attempt to contact the emergency services.

2017 CIS: The Economics of road safety and insurance - discusses telematics and PHYD insurance

2018 QBE Insurance: How Insurance Box works - first Australian PHYD insurance product? Update Oct 18: QBE has withdrawn this product!

2018 Ubicar has introduced a telematics safety product in Australia. Sydney's Northern Beaches Council has a safe driving competition for residents.(update 2023: No longer available)

  Created by Michael Paine, March 2012