Seeking to avoid the privacy and cost concerns that have impeded the success of telematics based personal auto policies, Sydney, Australia-based Real Insurance has launched a trust-based product relying on mileage alone to limit premiums according to individual customer behavior.
Real Insurance's PAYD product, created in partnership with San Francisco-based Exigen Insurance Solutions, will allow policyholders to report their mileage on an honor system, according to Roger Grobler, CEO, Real Insurance.
"Motorists are changing their travel patterns to accommodate the rising cost of gas, increased traffic congestion and environmental concerns," Grobler says. "Against this backdrop, we felt it was time to offer a PAYD product; we created the fist product not to require a monitoring device by enabling customer to report odometer readings."
Real Insurance's mileage-only approach is a departure from the telematics-based Pay As You Drive approach developed by Mayfield, Ohio-based Progressive Insurance. The system works through the use of a "black box," installed within a customer's automobile, which records location, speed and overall mileage and potentially more detailed information about how drivers turn and brake. Over the last several years, Pay As You Drive programs have failed in the U.S. and U.K. owing to privacy and cost concerns, respectively. Recently Progressive launched its MyRate program, which uses a portable telematics device. GMAC (Maryland Heights, Mo.) has launched a mileage-only telemetry-based program in partnership with automobile GPS vendor OnStar.
Real Insurance's decision to offer a product that didn't track drivers nevertheless presented technology challenges, according to CEO Grobler. The carrier sought out Exigen after a previous policy administration system installation failed to provide the flexibility needed to support the PAYD product. "Exigen had the complement of integrated policy administration, billing and claims solutions and a world-class team that was able to meet the challenges associated with designing and bringing to market a completely new way of offering PAYD insurance," Grobler says.
Real Insurance is a subsidiary of The Hollard Group (Sydney, Australia; over $16 billion of assets insured).
Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio