Usage-Based Auto Insurance in Louisiana

Pay-As-You-Drive auto insurance coverage bases premium on the actual usage of the covered vehicle rather than a flat-rate premium estimate.
The Louisiana Department of Insurance has acknowledged that at least one auto insurer in the State of Louisiana has sought and received approval for rates and rules for usage-based auto insurance, commonly referred to as “pay-as-you-drive” or “PAYD” coverage.  Premiums for PAYD coverage are based on actual usage information rather than just the standard flat-rate premium estimate.  PAYD coverage has been offered in California and other states for some time, but has only recently begun to gather steam in Louisiana.

PAYD premium is based on actual usage information such as odometer readings, driving speeds and braking habits.
PAYD bases premium for coverage on the data collected from the vehicle itself by means of random inspection, or from an electronic device installed on the vehicle that transmits information to the insurer.  This could include information such as the type of vehicle, the identity of the driver, the odometer reading, the amount of time the vehicle is actually in use, driving speeds, braking habits, geographic location and even the time of day the vehicle is usually driven.

The PAYD concept was first tested in the United States by the Progressive Casualty Insurance Corporation in 1998, but the company later discontinued the program in 2001.  GMAC Insurance began offering a PAYD  program to OnStar subscribers in 2004, and Progressive began another PAYD initiative in 2004, as well.  Other auto insurers, such as Liberty Mutual Insurance, have begun offering PAYD coverage, although some of the programs are trial initiatives offered only in certain states.

PAYD coverage met with resistance almost immediately by privacy advocates who criticized the random inspections and the transmission of the vehicle usage data, even though the transmission or inspections are with the express contractual consent of the policyholder.  Additionally, PAYD coverage can end up costing policyholders even more than a flat-rate premium if their usage is more than normal. 
PAYD has been criticized by privacy advocates because of the collection and transmission of vehicle usage data.

However, PAYD incentivizes policyholders to drive less, which could mean reduced costs not only for insurance but also for fuel, maintenance and repairs, as well as reducing the likelihood of accidents because the vehicle is on the road less.

No comments:

Post a Comment