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.”