Using “Pay As You Go” May Be Cheaper than Traditional Car Insurance

Wednesday, February 29, 2012

People who do not drive as often as others may not feel like paying a full premium for car insurance in Ontario every month is worth the trouble. Many insurance companies now offer a “pay as you go” plan with variations on implementation.

“The pay as you go plan works really well for me,” says Megan Foulier, a court transcriptionist who carpools to Los Angeles four days a week. “My base rate is really low based on where I live and the fact that I carpool. Any additional miles that add to the base rate don’t even compare to the kinds of premiums I was paying before. I don’t drive often. To church Sundays and grocery shopping once a week. So I’ve saved quite a bit of money.”

“Pay as you go” car insurance in Ontario may monitor not only the miles you actually put on your car, but driving behaviors as well, in order to provide you with a dynamic price for insurance from month to month. It is a way for insurers to more accurately and immediately determine and evaluate risk, and a way for safe drivers to potentially save money from high premiums that calculate risk on more abstract assumptions.

“I drive all over the place,” said Steve Morgan, a banker in Oxnard. “Pay as you go isn’t very cost-effective for me because I put a lot of miles on the car. But I still think it is a pretty great idea. I’m just waiting until they improve on it a bit. The next generation, you know.”

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