4 Reasons not to Pay as You Drive
Pay as you drive car insurance policies, or PAYD, are beginning to gain popularity in many states. They offer insurance customers the chance to only pay for the number of miles that they actually drive, as recorded by a special device that they can install in their car to track their mileage. The idea of lowering car insurance rates based on something you can control, like how far you drive, can be appealing to drivers who are working hard to make ends meet. There are some potential problems with PAYD that might make it less attractive when you look a little more closely, though.
Technical Costs
Insurance companies require that customers use a special electronic device in order to participate in the PAYD programs. The customers must purchase these devices from the insurance company before they can use them, which immediately cuts into the savings from the program. Customers will also find it less convenient to switch to a new policy with a different company because every time they switch they will have to purchase a new tracking device. This could force customers to stay with higher priced insurance rather than shopping for the best deal possible.
Hidden Expenses
The digital tracking system also has some hidden expenses that are not obvious at first. Insurance companies will need to charge customers for the cost of transmitting the data and processing it on a regular basis. The data transfer costs will be added into the customer’s regular premium, further reducing the amount of savings that can be expected from the new system. Since PAYD is such a new type of policy, insurance companies are still standardizing fee structures. It is possible that they could create enough extra fees to completely cancel out any financial benefit for the customers in the long run. It also becomes hard to keep a good budget when you don’t know in advance what insurance will cost you.
Potential Privacy Problems
PAYD programs have very little regulation at the moment. The insurance companies are on their honor to keep your personal information from being shared with advertisers or other entities that would benefit from the demographics you will transmit every time you drive your car. Potential privacy problems could become serious when you consider that the insurance company will know exactly how far you drive, what time of day you drive, and what geographic area you are driving in. It will be tempting for insurance companies to sell that information to the highest bidder.
No Proven Link Between Low Miles and Low Accident Rates
Insurance companies claim that participation in a PAYD program will cause accident rates to go down because people will try to drive fewer miles. Unfortunately, the link between how far you drive and how many accidents you are involved in has not been proven. Most car accidents happen within a few miles from home, so someone who is trying to cut down on their driving by shopping closer to their house is just as likely to be involved in an accident as someone who chooses to drive across town to go to the store.
Jessica Bosari writes for the money-saving site, Billeater.com. The site is devoted to helping people reduce expenses, save money and find great deals. Pay Billeater a visit for more money-saving tips!
