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Pay-As-You-Go Car Insurance Could Disrupt the Industry

We’re living in a gig economy; why not use gig car insurance?

Across an array of cultural norms, the world as we know it is in flux. Some view many of the changes with alarm, while others welcome them as opportunities. Regardless of which side of that fence we find ourselves on regarding any specific shift, we can’t ignore the decisions we’ll need to make as many of the constructs we take for granted are challenged. That’s an overly complicated way of saying that eventually, we’ll need to change with the times.

A gig economy is one in which freelance workers bounce from assignment to assignment rather than from company to company. Businesses bring a worker on board for a specific project. When that project ends, the worker goes in search of another. While constantly mining for the next gig can be stressful and unsettling, it can also be liberating. For the business, it means paying a specialist for a specialized assignment only as needed.

Cuvva is a Scottish startup attempting to revolutionize car insurance in the United Kingdom with what is basically pay-as-you-drive gig insurance. The service is scheduled to launch in April 2017.

Target Market

Sure, parked cars do suffer some damage from time to time, but let’s face it: Most insurance claims arise from driving-related incidents. A parked car is much less likely to be damaged or cause damage than one being driven. Convinced that conventional insurance — designed for frequently driven cars rather than low-mileage vehicles — charges owners who rarely drive too much in premiums, Cuvva wants to give those low-mileage drivers a cheaper way to go.

Pay-as-you-drive insurance targets an urban dweller who doesn’t use the vehicle for work commutes and drives fewer than 4,000 miles per year.

How It Works

Cuvva will offer a monthly insurance subscription for the equivalent of roughly $12 to $37 per month. As premiums for conventional vehicle insurance are set here, the driver’s risk rating, the vehicle and the location will determine the monthly subscription fee.

When the driver does take the car out for a spin, a smartphone-accessed app allows the driver to alert Cuvva, which then issues an hourly up-charge starting at about $1.50 per hour for the time the car is driven. As with many conventional insurance policies, this Cuvva plan will allow the owner to earn a no-claims discount each year.

The Benefit

It’s simple: Low-mileage drivers no longer have to pay for insurance as their car sits idle.

What it means to you: Whether we see similar insurance services in this country will depend on Cuvva’s success in the U.K. And then, it’s highly doubtful the powerful insurance lobby here would welcome the competition with open arms. But it would be a boon to low-mileage drivers.

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