Real Insurance in Australia has said that while pay-AS-you-drive insurance determines how many miles a person is driving, it does not identify if a person is driving poorly. For this reason, the company is looking into a pay-HOW-you-drive program.
Under this program, a telematic monitoring device (not a GPS system) would reveal how the car is driven as well as miles. It would capture information such as speed, the rate of acceleration and deceleration, and time of day a vehicle is driven.
The concept, could promote safe driving as customers who know, for example, that the system is capturing whether they are driving during higher-risk hours between 11 p.m. and 5 a.m. may decline to do so.
A system such as pay-how-you-drive could also change the way insurers view rating factors. Insurers can see if an 18-year-old is driving more like an experienced driver, and if so, that 18-year-old can be rated similar to an experienced driver. Conversely, if a driving veteran is operating like a reckless 18-year-old, rates can reflect that as well.
Pay-how-you-drive, and the information it captures, is also less of a privacy concern than another concept: pay-WHERE-you-drive.
Under pay-WHERE-you-drive, a GPS system captures all driving information, including where an insured is at a given time. This system could be quite invasive when it comes to privacy.