There are many people out there who don’t drive that much but are still buying car insurance in case they have a crash. We know that insurance premiums are priced on risk so why should someone who doesn’t drive much pay more for their insurance. They shouldn’t and Pay As You Drive insurance has hit the television screens in the last year letting everyone know that if you insure your car with them you will only pay for the kilometres you drive.

Pay As You Drive (PAYD), underwritten by Hollard Insurance Group of South Africa, has been in Australia since 1999 but has made leaps through first Real Insurance and now Pay As You Drive. Pay As You Drive is the first insurance provider in Australia that lets consumers pay insurance based on their odometer reading which is basically what it is. It works like this. You pay a minimum premium on your insurance and then you pay an amount per kilometre you drive. You purchase these kilometres off PAYD and then you get a refund if you don't use them all. This refund comes in the way of a roll-over to the next year if you continue using PAYD or they will refund you in cash. If you exceed the kilometres you bought as part of your policy then you will have to amend your policy and buy more kilometres or your comprehensive insurance will go to a 3rd Party Fire and Theft policy which PAYD calls ‘outside of kilometres”. You must initially buy a min of 5000km and there is no min purchase, ie. If you want you can purchase 5212km, and number they approve of over 5000km. You provide PAYD an odometer reading to begin with and your insurance policy starts when your car hits that number. That is why it is important to give them the odometer reading for when you want your policy to start.

Pay As You Drive are correct when in their TV ads they claim to be the first insurance company of its kind in Australia, but is the concept of charging insurance premium based partly on kilometres driven is not a new one at all.

Many insurance companies these days ask you how many kilometres you drive a week or how often you use your car and these figures are factored into your insurance premium. For instance, car insurance policies issued by CGU such as AON, Bank SA, Australian Unity, St.George, Bendigo Bank and HCF to name a few all ask for the amount of kilometres you drive as does ANZ, APIA and ING. Allianz and the insurers it underwrites such as Over fifty group, HSBC, NAB, National Seniors and Arab Bank Australia also ask how many kilometres you drive. And while we are at it we might as well name a few more such as those underwritten by Vero including Westpac, Bankwest, IMB, Bank of QLD and United Community. All these insurers ask this question because they factor in how much you drive when calculating your insurance premium. You can test how much they factor in the quote by adjusting the kilometres you drive and see the difference in the quotes.

Car Insurance is a highly competitive industry and companies will try all types of marketing tricks to get your business. Now I am not saying PAYD is not unique, it is, but don’t assume that no other insurance company factors in the kilometres you drive. Go get a few quotes and get to know the benefits of each insurer, you might be surprised at who is actually the best company for you to insure your car with.

QuoteMyWheels compares over 60 car insurance policies from all the companies you know of and probably a lot that you have never heard of. They are by far the biggest Car Insurance comparison site in Australia.

By David 'dub' Johnston