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Pay As You Drive (Through the nose)

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June 17, 2008
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Norwich Union sorry, Aviva* have announced that they are pulling the plug on their Pay As You Drive Car Insurance product, after disappointing sales and low take up of their tracking technology.

The idea behind PAYD is that you install some GPS telemetry gubbins in your car, so that Norwich Union can track where you go, when you go and how you get there, and in return they charge you a variable rate per hour of between 5p a mile and £1 a mile, depending on whether you’re on a leisurely drive through the Cotswolds at noon or caning it through Brixton at midnight.

The problems with this are manifold. Do you really want your insurer to know how fast you are driving on every occasion, where you go to regularly? Privacy is a major concern for many people with any kind of pay as you drive mechanism, and who is to say what NU would use the info for, or even if they’ll sell it to the highest bidder?

Even Norwich Union’s own marketing spiel could only come out with a statistic as underwhelming as this :

“24% of “Pay As You Drive”™ Pilot customers would have saved up to 30% compared to a standard Norwich Union Motor Insurance premium”

I’m not sure if that means that 76% were worse off, or no better off for choosing PAYD, but in any case you would expect bigger savings than this from the hot air they spouted when they launched the product.

In any case, ans as we previously pointed out, a limited mileage policy is a better, lower tech solution for most young drivers, and offers the added advantage of a set monthly bill, so no sudden stings or big fluctuations when you have to travel more than in an average month (like many students travelling long distances a couple of times per term.) What’s more, in many cases the savings with a limited mileage policy can be quite substantial, and you don’t have to worry about fitting an ugly black box to your pride and joy. (Hmm. I wonder if you have to declare a telematics unit as a modification.)

Despite Aviva’s attempt to spin this failure as a result of fears of a surveillance society, I think the real problem is that the product was quite gimmicky and did not in fact offer drivers an attractive way of using their cars, and so it was doomed to failure.

The 10,000 policyholders are now being substituted onto other policies, which means in a week or two we will be seeing uproar on the forums as someone gets stung for a massive premium increase. Oh dear.

*(incidentally, we told you that piece of news aaaages ago – before they did, in fact)

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