Why is Pay-per-mile Insurance Surging

Pay-per-mile auto insurance gains momentum

Recent interest has come from new customers and some existing users who switched as they cut back on driving. As the pandemic raged, auto insurers initially benefited last year in the United States with a nearly 40% drop in driving in April, and a total of 13% decline in 2020. Auto insurers benefited from the drop-off in driving, as it tends to result in fewer accidents. But they soon realized that customer needs are changing when it comes to car insurance.

CB Insights

Why customers choose pay-per-mile?

Why will anyone want to pay for when their car is standing idle? And why not opt for something new that is easy on the pocket. When a customer can get a personalized insurance policy where they pay for only what they use, it is also a great choice for those who use their vehicles often, for it means lower premium costs.

How insurers benefit from pay-per-mile offerings?

Pay-per-mile insurance policies generally follow one of two models — a bulk mileage purchase followed by a cost per mile, or a straight cost per mile policy. In either case, the mile driven is the primary driver of the policy cost. Due to the lower overall insurance costs for light commuters, transparency in pricing, and flexibility of pay-per-mile for non-traditional drivers, the past year has seen rapid growth. But sustained growth is now expected with better access to cost-effective telematics solutions, that is making pay-per-mile an attractive business model.

The future of auto insurance is personalization

The future of auto insurance will entail more UBI and telematics offerings. Companies that fail to adopt it will lose their good customers, leaving the worse drivers behind as their customers. The rise of pay-per-mile offerings in the pandemic, is pushing insurance companies to change their strategies for the post pandemic world. With more and more consumers opting for pay-per-mile, as it is easy on pocket, has an array of added benefits, and is a specifically good option for the younger generation of drivers, personalization in insurance offerings is all set to become the future norm.

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