The Future of Car Insurance

For the past 30 years car insurance has pretty much stayed the same, you ring up a company, give them your details and they'll give a price based on statistical data indicating trends among certain groups of people. So if you're a young male driver, you're going to be paying a lot more than a middle aged woman. Not because she's necessarily a better driver, but in theory middle aged women drivers are less of a risk than young males.

Is this a fair way to calculate your premium? Probably not, but what alternatives are there?

Well there are a number of pilot schemes running that could turn the way your car insurance premiums are calculated on their head. Pay Per Mile is most likely going to be the fairest way to pay in the future so who does it work.

You start off by installing a small GPS tracker unit in your car, it is likely that the consumer will have to pay for this and then they can go to any insurance company offering pay per mile schemes. This unit will record where you drive, how fast and at what time, you'll then get a monthly bill in the post and you only pay for what you use.

It's very similar to the way mobile phone bills are calculated, there are off peak times, expensive roads, cheap roads etc. You will be paying more to drive in the rush hour because there are more cars around and the risk of an accident is greater. If you drive later at night, you'll pay less, although the details haven't been set in stone yet.

So what are the advantages/disadvantages of this approach:

Advantages

- You only pay for what you use.

- Could help reduce congestion if people choose to travel out of rush hour.

Disadvantages

- People who drive for a living will be paying substantially more.

- Is big brother watching you?

Of course there are supporters for the old and new systems, but we suspect pay per mile car insurance is going to become the industry standard in the coming years because it's much more accurate.