"Pay-As-You-Drive" Insurance Can Provide Major Savings, Expert Says

Wed, Sep 03, 2008

GOLD RIVER, Calif., Sep 02, 2008 (BUSINESS WIRE) -- With gas prices through the roof and drivers seeking ways to drive less and save more, pay-as-you-drive car insurance is emerging as a prominent way consumers can cut car-related costs.

Hussein Enan, chairman and CEO of the insurance comparison shopping website Insweb.com, calls pay-as-you-drive insurance a "modern, innovative way for responsible consumers to save money" on auto insurance.

"It's fitting with the times," says Enan, a 40-year insurance industry who founded InsWeb in 1995. "With the price of gas skyrocketing, American drivers are already looking for ways to drive less. It makes perfect sense to allow drivers to save money on insurance if they reduce their mileage."

According to a Brookings Institution report, about two-thirds of households would benefit from a usage-based program, with an estimated average savings on auto insurance of about $270 per car per year.

Pay-as-you-drive insurance, which ties the cost of insurance to a driver's mileage, is gaining momentum in the Northeast in particular. New Jersey, which historically has among the highest insurance premiums in the country, just became the fifth state where Progressive, the third largest auto insurer, is offering pay-as-you-drive as an option. Drivers who select pay-as-you-drive have a device installed in their vehicles that measures driving behavior through distance, time of day and other factors; the factors are reported to the insurance company and premiums are set accordingly.

A second program, offered by GMAC Insurance was launched last year and is currently available in 34 states.

"The key for consumers is to make sure you're the right kind of driver for a pay-as-you-drive plan," Enan added. "If you drive a lot at night because you work the night shift or you drive at odd hours, then you might want to think about other ways to save on insurance."

For those consumers, Enan recommends reevaluating a policy every six months and comparison shopping. Consumers who do this save an average $301 per policy, according to one study. Also, use an insurance comparison website such as InsWeb.com to access free quotes, a list of agents in your area, and an online library of consumer tips and articles on reducing insurance costs, Enan says.

Source : http://www.marketwatch.com/