Pieter Lekkerkerk describes current alternative pricing models making inroads in car insurance in the US: pay-per-mile and driving-score based pricing.
In the last few decades car insurance premiums have traditionally been set based on o a risk assessment questionnaire (typically covering the car, its usage, the driver and her/his background among others), enriched with data from e.g., credit bureaus and the Department of Motor Vehicles (on e.g. traffic fines). In the wave that saw the disruption of many business models in the past few years two main alternative pricing models have emerged:
- Pay-per-use: A rate per mile or minute driven, sometimes complemented by a fixed charge (e.g., MetroMile)
- Driving score-based rates: Tariff is based on the risk implicit in the driving behavior of the driver (speeding, sharp braking etc.)
Areas covered in this article include:
- The relevance of these models in the Brazilian market
- The impact of alternative pricing models in the US
- Key differences between the US and Brazil in claim
- Winning models for Brazil
Read the full article, Alternative Pricing Models in Car Insurance, on the Mirow and Co. website.