How a niche pay-as-you-drive insurance product becomes mainstream


A number of different market forces shape business opportunities. For the past decade, the technology that enables pay-as-you-drive insurance products improved significantly. 

Still, the pay-as-you-drive insurance product remained nothing more than a niche market. In 2020 an actual global pandemic and a new lifestyle created a significant shift in consumer preferences when it comes to motor insurance products. 

This created a massive market opportunity for those insurance companies seeking to reposition. Stars are aligned, for the usage-based insurance (UBI) products to become the mainstream. 

The pay-as-you-drive Model (PAYD)

As the name suggests the pay-as-you-drive model depends on the amount of driving of the policy owner. Its price can be calculated in two ways: 

  • by the distance
  • or by the time (hours, days).

Furthermore, just like in the traditional insurance policies, the prices depend upon the type of vehicle used, measured against time, distance, behavior, location and additional data.

Pay-per-kilometer insurance (PPKM)

Pay-per-kilometer insurance (PPKM) within the pay-as-you-drive model, uses distance driven as the main parameter for price calculation.

It goes without saying that MTPL ( Motor Third Party Liability ) coverage remains unchanged, due to a number of reasons, but the most important one being the regulation.

Pay-per-kilometer insurance (PPKM) is firstly and mostly changing how comprehensive coverage is priced and consumed. Stationary risk and associated damages are covered on a whole year basis, whereas other risks such as collision with an animal, other car or object, bodily injuries and services such as road assistance are covered and priced on a kilometer basis.

Benefits for the insurer

With Amodo’s technology for the pay-as-you-drive model, the insurer will be able to create a new insurance product tailored to fit their users’ individual needs. Personalized offers can be created due to the collected behavior data.

This product will also differentiate the insurer from the competitors, boost brand awareness and have a positive impact on consumer perception. 

Benefits for the customers

The main benefit for the customer is the control over the cost rate because it’s based on the actual kilometers. The customer can achieve significant savings by tracking the kilometers and monthly costs. Also, the customer can get a personalized policy based on individual needs and upgrade.

Amodo’s system enables customers to manage their monthly distance “allowance” and set the parameters for the entire year, as well as to top it up with extra kilometers whenever needed.

Cost calculation

Pay-per-kilometer policies charge a daily or monthly base rate that is based on factors similar to those used when setting rates for a traditional insurance policy. The monthly bill typically is based on the number of kilometers driven in the previous month.

The base rate varies from person to person and company to company. It depends on the driver’s history, past at-fault accidents, vehicle model, age, and if the customer has a spouse or not.

Pay-per-hour insurance (PPH)

Pay-per-hour insurance (PPH), also known as hourly insurance or pay-as-you-go insurance, is very similar to the pay-per-kilometer model. The main difference is that the pay-per-hour (PPH) model based on Amodo technology, can be applied to other insurance products, besides motor insurance, as well, since cost calculation depends on the hours instead of the distance.

Benefits for the insurer

This type of insurance is new within the pay-as-you-drive model but very popular with customers. They are pleased that it’s easy to arrange and very specific to their needs.

As an insurer, it’s a great service for building customer loyalty, especially for frequent business travelers.  

Benefits for the customers

Customers have the option to define the duration of the insurance policy in advance or shortly before the trip. The policy duration can be a few hours or days if further travel is involved. 

Pay-per-hour insurance is great for long journeys shared with other drivers, business trips uncovered by the regular policy, test driving and driving tests, driving a borrowed car and more. 

Cost Calculation

Depending on the company, the only information needed is personal information and the car registration number. The cost depends on the policy duration, personal information (mainly driving experience), location and type of vehicle, among others.

The Amodo platform enables insurance companies, digital brokers and adjacent industries to market pay-as-you-drive insurance services and engage users through smartphones. With Amodos help, insurers are backed with the technology needed to launch PPKM and PPH insurance products and build their customer base.

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