PAYD
2654641
224134083
2008-07-07T13:45:30Z
Lknapp1
5640428
/* Progressive Insurance */
'''PAYD''' (or '''Pay As You Drive'''™) is a type of [[telematic]] [[automobile insurance]] sometimes known as usage based insurance whereby the costs of [[motor insurance]] are dependent upon vehicle usage, particularly distance traveled. Pay As You Drive™ is a [[trademark]] of [[Norwich Union]] in England and Progressive in the US. The term pay as you drive has also been used by certain governments in relation to another cost of motoring, namely [[road pricing]].
==Economic and environmental impact==
In economic terms, PAYD can be regarded as a form of [[Differentiated service (design pattern)|
context-aware service]].
PAYD has been strongly promoted by environmental and transport groups, mostly as a way of encouraging people to use their cars less.
However, some transport planners have suggested that PAYD could be seen instead as a way of generating funds for building additional roads [http://news.bbc.co.uk/1/hi/uk/6186496.stm].
==PAYD insurance==
=== Concept ===
The simplest form of Pay As You Drive bases the insurance costs simply on the number of miles driven. However, the general concept of Pay As You Drive includes any scheme where the insurance costs may depend not just on how much you drive but how, where and when you drive.
Pay as you drive (PAYD) means that the insurance premium is calculated dynamically, typically according to the amount you drive. Driving is monitored using a secure black-box device in the vehicle, linked to a national network of satellites and data recorders. The formula can be a simple function of the number of miles you drive, or can vary according to the type of driving or the identity of the driver. Once the basic scheme is in place, it is possible to add further details, such as an extra risk premium if someone drives too long without a break, uses their mobile phone while driving, or travels at an excessive speed.
Insurance companies have always tried to differentiate and reward "safe" drivers, giving them lower premiums and/or a no-claims bonus. However, conventional differentiation is a reflection of past history rather than present patterns of behaviour. This means that it may take a long time before safer (or more reckless) patterns of driving and changes in lifestyle feed through into premiums.
PAYD provides a much more immediate feedback loop to the driver, by changing the cost of insurance dynamically with a change of risk, and this means drivers have a stronger incentive to adopt safer practices. For example if a commuter switches to public transport or working at home, this immediately reduces the risk of rush-hour accidents. With PAYD, this reduction would be immediately reflected in the cost of car insurance for that month.
=== Potential benefits ===
* Commercial benefits to the insurance company from better alignment of insurance with actual risk. Improved customer segmentation.
* Potential cost-savings for responsible customers.
* Social and environmental benefits from more responsible and less unnecessary driving.
* Due to the [[24/7]] aspects of vehicle location, it enhances security - both personal security and vehicle security. The GPS technology could be used to trace the vehicle whereabouts following an accident, breakdown or theft. <ref name = "Iqbal"/>
* More choice for consumers on the type of car insurance available to buy
* The same GPS technology can often be used to provide other (non insurance) benefits to consumers,e.g. satellite navigation <ref name = "Iqbal">[http://www.gmat.unsw.edu.au/snap/publications/usman&lim2006a.pdf Iqbal & Lim, "A Privacy Preserving GPS-based Pay-as-You-Drive Insurance Scheme", International Global Navigation Systems Society, 2006]</ref>
* Social benefits from accessibility to affordable insurance for young drivers - rather than paying for irresponsible peers, with this type of insurance young drivers pay for how they drive.
=== Potential drawbacks ===
* The system recognises only codified, rather than actual, risk. A speeder, for example, would be heavily penalised in comparison with someone who drove in observance of the speed limit. This would not take into account the circumstances involved, eg if the speeding driver in question was driving in an otherwise safe manner, or if the slower driver was changing lanes abruptly, or driving in an unattentive or careless manner.
* Charges would be very high for young drivers, especially at night, and as such would strongly discourage them from driving socially. In many areas public transport is non-existent at night, and such high charges could have a strong negative impact on their quality of life.
* GPS tracking of vehicles, 24 hours a day, could be seen by many people as an unacceptable infringement on their right to [[privacy]]. <ref name =
"Iqbal"/><ref>[http://money.cnn.com/2007/07/13/autos/gmac_onstar_insurance/index.htm?source=yahoo_quote Valdes-Dapena,Peter, "Big Brother can save you money", CNN Money.com, July 17, 2007]</ref>
* The potential of PAYD systems for automated traffic law enforcement could result in a reduction of the use of human [[traffic police]] as has been reported since the widespread introduction of [[speed cameras]]. This could result in reduced detection of [[drunk driving]] and other dangerous offences.
=== Commercial products ===
Insurance companies offering various forms of PAYD either as fully commercial products or at least on a trial basis include [[Norwich Union]] and [http://www.coverbox.co.uk Coverbox] in the UK, [[Hollard Insurance]] in South Africa, [[AIOI Insurance Company]] in Japan and [[Aviva]] in Canada.
Norwich Union have now discontinued there PAYD product in the UK, and announced that existing users will have there contracts terminated. The reason given to customers was lack of demand for the service, and disappointing uptake.<ref>http://social.telematicsupdate.com/content/end-road-payd</ref>
====Progressive Insurance====
[http://auto.progressive.com/progressive-car-insurance/myrate-default.aspx MyRate] is a car insurance program developed developed by [[Progressive Corporation|Progressive Insurance]]<ref>[http://newsroom.progressive.com/2008/June/myrate-launch.aspx One-of-a-Kind Car Insurance Program Lets Drivers Save Big Bucks Based on How They Drive]
</ref>. It is a voluntary, behavior-based insurance program that gives drivers a customized insurance rate based on how, how much, and when their car is driven. MyRate is currently available in [[Alabama]], [[Michigan]], [[Minnesota]], and [[Oregon]].
Driving data is transmitted to the company using an on-board telematic device. The device connects to a car's OnBoard Diagnostic ([[OBD-II]]) port (all [[automobiles]] built after [[1996]] have an OBD-II.) and transmits speed, time of day and number of miles the car is driven. There is no GPS in the MyRate device, so no location information is collected. Cars that are driven less often, in less risky ways and at less risky times of day can receive large discounts.
The MyRate device used to be based on [[Davis Instrument]]'s [[CarChip]], but it now uses new technology.
Progressive has received patents on its methods and systems of implementing usage-based insurance and has licensed these methods and systems to other companies. Progressive has service marks pending on the terms Pay As You Drive<sup>SM</sup> and Pay How You Drive<sup>SM</sup>.
====AIOI====
AIOI introduced a Pay as You Drive insurance product in Japan in 2005. They partnered with [[Toyota]] to develop the technology. The technology is based on Toyota's [[G-Book]] terminals. <[http://www.ioi-sonpo.co.jp/en/ar_pdf/ar2005e_01.pdf AIOI 2005 annual report, page 37.]</ref>
====MileMeter====
[http://milemeter.com MileMeter] is an insurance startup company that intends to offer a patent pending form of pay-by-the-mile form of auto insurance. They were selected as a finalist in the 2007 [[Amazon.com]] [http://developer.amazonwebservices.com/connect/amazon_startupchallenge.jsp Web Services Startup Challenge].
====IRIS====
The International Research and Intelligent Systems Global (IRIS) company's Pay As You Drive and Fleet Risk Management products won Strategic Risk magazine's "European Risk Management Product of the Year 2008". These products are currently under evaluation by two major insurance companies. <ref>[http://www.birminghampost.net/birmingham-business/birmingham-business-news/2008/05/12/iris-earns-top-european-accolade-65233-20899381/ "IRIS earns top European accolade", The [[Birmingham Post]], May 12, 2008]</ref> IRIS is located in [[Coventry, England]]
===Tests===
A number of tests of telematic auto insurance are currently underway or recently completed. These tests are being conducted in many different countries. They include:
*[[King County]], [[Washington]]: 5000 person trial by [[General Casualty Insurance|Unigard Insurance]] with US$ 1.9 million in US federal funding <ref>[http://www.metrokc.gov/exec/news/2007/0327payasdrive.aspx "King County gets $1.9 million to test drive innovative statewide car insurance program", March 27, 2007]</ref>
===Patents===
[[Image:Aioi patent.JPG|thumb|300 px|Telematics Insurance System from AIOI patent application WO 2005/083605]]There are several issued [[patent]]s <ref>[http://www.bakosenterprises.com/IP/B-10152004/IPB-10152004.html Nowotarski, Mark, "Progressive Builds a Fortress of Patent Protection", Insurance IP Bulletin, October 15, 2004]</ref> and pending [[patent application]]s that have been filed worldwide on various inventions related to telematic auto insurance. These include:
*{{Cite patent|EP|0700009}} "Individual evaluation system for motorcar risk"
*{{Cite patent|US|5797134}} "Motor vehicle monitoring system for determining a cost of insurance" Progressive auto insurance
*{{Cite patent|JP|2002259708|application}} "Vehicular Insurance Bill Calculating System, On-Vehicle Device, and Server Device", [[Toyota]]
*{{cite patent|WO|2005083605|application}} "Insurance Fee Calculation Device, Insurance Fee Calculation Program, Insurance Fee Calculation Method, and Insurance Fee Calculation System", [[AIOI Insurance Company]].
In order to make sure that patents did not hinder its Pay as You Drive development program, Norwich Union purchased the UK version of EP0700009 and obtained an exclusive license to any EU patents that may emerge from Progressive's EU patent applications.
===Trademarks===
*"Pay as You Drive" is a trademark of [[Norwich Union]] in England. <ref>[http://www.norwichunion.com/pay-as-you-drive/ Commercial web site for Norwich Union showing trademark]</ref>
*"Pay as You Drive" is a registered trademark of [[Progressive Corporation]] in the US. <ref>[http://tess2.uspto.gov/bin/showfield?f=doc&state=8p468p.4.1 US registration of "Pay as You Drive" trademark]</ref>
==See also==
* [[Road Pricing]]
* [[Insurance patent]]
* [[Auto insurance risk selection]]
==References==
<references/>
==External links==
* [http://www.centspermilenow.org/ Cents Per Mile organization]
* [http://www.environmentaldefense.org/article.cfm?ContentID=2205 Environmental Defense]
* [http://www.newdream.org/newsletter/PAYD.php New American Dream]
* [http://www.vtpi.org/tdm/tdm79.htm Pay-As-You-Drive Vehicle Insurance]
* [http://news.bbc.co.uk/1/hi/business/5408338.stm "Insurer launches per-mile cover"] BBC News Report (October 5 2006)
* [http://news.bbc.co.uk/1/hi/uk_politics/6160877.stm "Motorists 'must pay for road use'] BBC News Report (December 1 2006)
* [http://www.payasyoudrive.co.za Pay As You Drive Car Insurance]
*[http://www.nctcog.org/trans/air/programs/payd/index.asp Texas Driving Research Study]
*[http://www.obdclearinghouse.com/oemdb/ National ODB Clearinghouse]
*[http://www.elecdesign.com/Articles/ArticleID/8663/8663.html Big Brother in the Back Seat, Electronic Design Magazine, Sept. 06, 2004]
*[http://www.davisnet.com/drive/products/carchip_products.asp Davis Instruments CarChip product literature]
*[http://www.aviva.com/files/pdf/PAYD_guide.pdf Norwich Union guide to PAYD]
*[http://www.PriPAYD.org/ PriPAYD.org : Privacy Friendly Pay-As-You-Drive]
*[http://www.georgesdelataille.com/georges_de_la_taille/2007/03/pay_as_you_driv.html Pay-As-You-Drive from Georges de la Taille]
*[http://www.pay-as-you-drive.org/ Privacy Friendly PAYD]
*[http://www.ebonus.org/ ebonus.org : The flexible insurance premium providing driver privacy protection]
[[Category:Vehicle insurance]]
[[Category:Road transport]]
[[Category:Transport economics]]
[[hu:PAYD]]