FCA approves another Pay-As-You-Go insurer
The FCA (Financial Conduct Authority) has granted authorisation for new motor trader insurance intermediary By Miles [http://www.insurancetimes.co.uk/motor-insurance-startup-gets-fca-approval/1422047.article]. The start-up is one of several new businesses operating a Pay-As-You-Go model, allowing motorists to pay a tailored rate per mile on top of a flat monthly subscription charge. The personalised nature of the coverage means those who make fewer or shorter than average trips can make appropriate savings on their premiums.
By Miles has yet to select an insurer to underwrite its business but regulatory approval means the company is set to launch its product once a risk-carrier has been appointed. Having received £350,000 of funding from a Jaguar-Landrover backed start-up investment programme, By Miles looks set to follow in the footsteps of Just Miles and Cuvva, the two motor insurers who announced their intentions to offer Pay As You Go earlier this year.
While the concept is still in its infancy, Cuvva has claimed that some short-distance drivers could save up to £500 per year compared to their existing annual policies. Pay-As-You-Go motor insurance was first pioneered by Norwich Union, now Aviva, in 2005; however, the insurer removed the product from the market in 2008 as it found the cost of monitoring the miles driven was too high.
As the cost of electronics continues to fall and data availability continues to rise, we can expect to see an increase in more intelligent and sophisticated forms of insurance going forward. The FCA’s approval of By Miles means the UK could now have a handful of insurers offering Pay-As-You-Go cover by the end of the year.
While Pay-As-You-Go insurance will allow existing short-distance road users to reduce their premiums, it remains to be seen whether the product will encourage a significant number of new drivers to take to the roads. With the increasing popularity of Uber and cycling, as well as environmental concerns about using a car for short distances, city driving remains an option rather than a necessity. However, if the Pay-As-You-Go insurers can provide intelligent pricing and are able to market their products effectively, that option will appear increasingly viable.