In the numerous presentations that I have carried out on the system “Pay as you drive” I have been able to observe that my speaker, immediately, identified it as a product dedicated to the segment of the drivers who use very little his vehicle.
Only people related with the sector of the automobile insurance were able to identify that, in fact, we were speaking about a very important segment of the market in its size and overalls in its profitability. As 10% of the vehicles make less than 5000 annual Km, they have a very low accident probability and they are those that contribute in a great way the biggest benefits to the insurance companies.
It would be necessary to return to the first presentation of the report Distance-Based Vehicle Insurance Feasibility, Benefits and Costs: Comprehensive Technical Report (Todd Litman, VTPI) in the year 2001 so as to verify a proportional scientifically correlation among the distance traveled by the drivers and the probability of suffering an accident.
The second deduction usually made is that if you pay the insurance in function of the use, the drivers would reduce the use of the vehicle. It is a topic on which they have being developing studies as the problems of congestion of the traffic increased, although the publication of 1998 Technical Methods for Analyzing Pricing Measures to Reduce Transportation Emissions continues being an important one.
With the data of this study we can estimate that the users to whose is imputed the cost of the insurance in function of the use of the vehicle would reduce their kilometrage, and consequently their risk, approximately 10%.
On the other hand a study of the VTPI also verifies that approximately 50% of the accidents have their origin in errors of the own driver. In
Spain the recent studies show taht the 34% of the accidents are because of a lapse of concentration, which is due most to the fatige and the 24% because of inadequate speed.40 % of the deaths didn´t have the seatbell fastened.
The capacity of our system “Pay as you Drive” to identify this type of circumstances allows us to consent to another market segment; that of those drivers able to accommodate their speed to the state of the road, climatology, congestion of the traffic, etc, and avoiding to circulate in adverse circumstances that can imply to increase their risk.
And it not only allows us to segregate this market of low risk but also gives us an influence actively tool about the habits and attitudes in the conduction, informing the user about the risk of their behaviors so that it can be aware of the same one and to reduce it.
There is another consequence of the study of the TPI, approximately 25% of the accidents are as consequence of errors in the other drivers. The congestion situations, or certain schedules are specially dangerous.
The first conclusions of the pilot tests of Norwich Union, information obtained on the registrations of 30 million days, is that the probability of a young driver of having an accident is 14 times higher at night in the weekend than in an ordinary day. We can also segment the market which does not use the vehicle under these conditions and segregate it of the general market.
But, again we can glimpse the possibility to influence in the conduction habits so that it avoids the circulation under specially dangerous conditions as much as possible.
In fact all this takes us to the obvious conclusion that this insurance system allows a radical improvement in the segmentation of the market identifying those users that present, for different reasons a profile of lower risk than what the global data statistics assign them. We are speaking about the best clients in the insurance companies, those that in fact are paying the costs from the accidents of a group of drivers of high risk, for the single fact of sharing with them spoils of age, sex, antiquity of the identification card of driving or the area in which they live.
But what was not so obvious, is that besides improving the segmentation of the insurance radically, this policy can motivate the clients to take certain cautions that can make reduce its risk until 30%.
For those people not familiarized with the sector of the insurance of the automobile, they should keep in mind that in the developed countries the cost of the circulation accidents are between the 1 and 2% of the gross national product and that 20% of the clients originates 80% of the costs.
But the market is limited. This means that these clients that we segregate of the market, because we identify that they have a low risk, are the same ones that allow the insurance company to obtain benefits. In fact they are their more profitable clients. What would happen if an insurance company loses 10% of its most profitable clients? The consequence is that if they want to maintain its benefit, they would have to elevate the policy of the rest of its clients approximately 7%.
But this increase in the rates makes that the potential market of the insurance “Pay as you Drive” is notably increased because it opens new possibilities to identify the most profitable clients in the insurance companies again. In fact the more expensive is the rate of the insurance, bigger the potential market of the system “Pay as you drive.”
The system “Pay as you drive” is an element so radical of segmentation of the market that its success would imply a serious distortion in the market causing an unstoppable increment in the cost of the conventional policies, so the point that at the end of the transition process would end up to disappear or to only survive in marginal markets.
