The RAC has introduced a ‘pioneering’ new kind of car insurance whereby drivers are charged for coverage by the mile, rather than on a flat monthly or annual basis.
Dubbed Pay by Mile, the new scheme is designed to help people aged over 21 who drive fewer than 6000 miles a year - a growing portion of the market, the RAC says, due to lockdowns and the other effects of the Covid-19 pandemic.
After paying a one-off activation fee of £50, drivers insured under the scheme pay a small monthly fee to insure their vehicle when it’s not being used (the parked price) and then an additional rate of as little as 4p per mile for every mile they drive (the mileage price).
“For those who drive relatively few miles, there may be significant savings to be had,” said an RAC spokesman.
Precise per-mile costs are determined on a case-by-case basis, with 4p quoted as the minimum price.
Drivers keep track of their insurance fees via RAC’s Pay by Mile app and a small RAC ‘drive tag’ that, when fitted to their car’s windscreen, detects when the car is in use. The tag then transmits the distance travelled to the app to work out the cost.
Pay by Mile insurance is paid for monthly and can be cancelled straight away with no fee. The policy is underwritten by Highway Insurance Company Limited, part of LV. The Pay by Mile app is based on a platform created by insurance technology company Wrisk.
"Car insurance is a market that’s been ripe for a shake-up for some time," RAC managing director Mark Godfrey said. "We’re thrilled to introduce a truly pioneering new product which is ideally suited to drivers who don’t do that many miles.”
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I wouldn't consider it "pioneering". I've been using Bymiles since September, and think it's worked out rather well for myself.
They supplied me with a mileage tracker that plugs into the OBD port, and I get a bill each month depending on how many miles I drive. They tell me they're only interested in monitoring my mileage and nothing else.
As someone who doesn't do more than 6000 miles per year I'm actually saving cash. I did have to pay a basic £200 when I started the policy, but as a new customer they credited my account with £60 pounds worth of free miles.
Customer service has been pretty good too. When I was rear ended by some numpty whilst stationary at a pedestrian crossing, they took care of everything. id definitely recommend them - if you're a low mileage driver.
Why does everything have to be per month?
I mean, I get it from a business perspective - they get a guaranteed monthly income stream.
But from a consumer point of view... It's pretty annoying. 6000 miles p/a is roughly 500 miles a month at 4p/mile is £20/month. So a standing parking charge is probably going to be around £10-15 a month. So £30-35 a month which works out at £350-£420 a year. Which would be the cheapest it would be. Add in the risk factors - so what routes you drive on will be tracked to give a risk profile per mile. Accident 'black routes' will probably be charged at 10p/mile or more.
There will also be a risk profile added to where you drive and park to, how quickly you drive and how quickly you complete your journeys. That 4p/mile will never be charged for the whole of your annual journey profile. It will probably account for maybe 10-20 miles per year. The rest will be anything from 5-25p/mile.
example:
10 miles @ 4p
40 miles @ 8p
70 miles @ 9p
80 miles @ 10p
100 miles @ 12p
200 miles @ 14p
500 miles = £57.90 = £694.80/year - just on mileage.
So you can see how just introducing a few different 'risk brackets' on the mileage charge and splitting the 500 miles in to different risk brackets the price can sky rocket. And I can guarantee that there will be no clear definition of why certain roads are placed in certain risk brackets.
It will change based on time of day too, So the same stretch of road could be 4p/mile at 2am, but 18p/mile at 9am. The policy can still be sold as 'from as little as 4p/mile' but in reality you would never be charged that.
Already been done - copied the idea from ByMiles
Thanks. I couldn't think of the (no perfectly obvious name), but knew it had been done already, so not sure where "pioneering" comes in. Though the whole thing reads like an advertorial anyway, so they probably meant it.
ByMiles are not cheap. They wanted £440.00 just to keep my car parked and then 5.4p per mile thereafter. They do cap, which is something, but if I did 10,000 miles I'd pay nearly a thousand pounds for the year. I last paid £380, annual for the same car with no declared mileage at all. Maybe they'd be better value for a young / inexperienced driver that won't do much mileage at all (and therefore the risk of a parked car is lower to the insurer).