By The Mile Car Insurance – the way of the future?

Who do you think should be paying more in motor insurance – someone who drives 50,000 miles a year, someone who drives 15,000 miles a year, or someone who only drives 6,000 miles a year? The actual answer: none of the above, in most cases UK car insurance providers do not consider the number of miles you drive each year as being important when determining your motor insurance premium. However, insurance may be changing.

Recently Norwich Union considered the exact scenario set out above and, rather unsurprisingly, came to the conclusion that an all you can consume car insurance policy may not be the most sensible way to go about insuring a car and its driver. To compensate for this, Norwich Union is one of the first motor insurance providers in the UK to have introduced a per-mileage car insurance policy.

Are my car insurance premiums going to go up?

Naturally the first thing that may concern you with a per-mileage car insurance policy is the additional cost to you. In fact, both in the United States, where the scheme has been running for a while, and Norwich Union’s own initially returns indicate that there is no extra cost incurred with per-mileage pay-as-you-go car insurance. Rather, what is being evidenced is (i) low mileage drivers, no longer saddled with having to subsidize high mileage drivers’ insurance policies, are saving up to 25% on their previous motor insurance premiums; and (ii) high mileage drives are becoming more conscious of the number of miles they are driving each year and are cutting back on their high mileage driving, resulting in savings on fuel costs as well as being more eco-friendly.

Nonetheless, a majority of car insurance providers remain reluctant to introduce per-mile car insurance for their policyholders in the mistaken belief that it will face opposition from their customers as being more expensive than the system already in place.

How do you regulate per mile car insurance?

As anyone who has visited a second-hand car dealer knows, verifying the mileage that a car has done is difficult – to say the least! How then do you regulate per mile car insurance? The answer may not be as difficult as you think. First off, with the new computerized digital recording of mileage, it has become much harder to tamper with your mileage recorder – as such, this new digital recording system can be used. However, if it was felt that this system was unreliable, then a Global Positioning System could be used to accurately record a driver’s yearly mileage and calculate their motor insurance.

The role of the British government

Whether you like the idea of by the mile car insurance or not, the scheme has been warmly received by the British government, who see a number of benefits from the scheme beyond the realm of motor insurance. As such, do not be too surprised if you see by-the-mile motor insurance actively promoted by the British government in the not too distant future.