Dynamic Pricing - Direct Line Case Study

Direct Line may Charge Vehicle Insurance by the Mile Vehicle manufacturers are now fitting satellite tracking devices to many vehicle (automobiles) to track their whereabouts if they are stolen. Now it seems that UK insurer Direct Line may pilot a system that will base insurance premiums on when, where and how much a vehicle is driven. A City centre journey in the rush hour or late at night would cost more per mile than a daytime journey in a remote country area. As now, the age of the driver and the type of vehicle will also influence the rates and there will be a fixed charge for fire and theft whilst the vehicle is parked. The system has been developed by the US insurer Progressive Insurance and is called Autograph. Typically, charges range from 0.9p to 5p per minute (0.01 Ecu/min. to 0.05 Ecu/min.). Later the system could link to the on-board vehicle management computers to ascertain the drivers driving behaviour. Fast accelerations and braking and inappropriate speeds on narrow country lanes attracting higher rates. The equipment costs a few hundred pounds. Progressive has been awarded 2 US patents for its usage-based auto insurance rating system. Civil liberty groups are concerned over the possible invasion of privacy and the keeping of information on journey details. Road safety groups are concerned that drivers may drive fast to reduce journey times - maybe a rate per distance travelled would be better than a per minute rate. Environmentalist believe the system could be an incentive for drivers to reduce the length and frequency of their journeys. Winnett, Robert, 2000, Car Insurance to be charged by the mile, Sunday Times Money, 3 December 2000. Thanks to ThePriceMan for mentioning this article.

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