With so many services now available on a subscription basis, it’s little surprise that the insurance industry is moving in that direction too. One of the newer solutions from auto insurers is the pay-per-mile insurance plan.
The idea is straightforward: you pay a flat fee to cover theft insurance and each time you drive the car an extra charge is added on top of that. The insurance company knows how many miles you’ve covered thanks to an IoT device plugged into your vehicle’s diagnostics port. According to Metromile, one of the most popular pay-per-mile providers on the market, this solution “could cut your bill in half”.
So, is it such a good idea? Let’s weigh the pros and cons.
Bad for Privacy
Even if you drive less than 3,000 miles a year, you might want to reconsider if the pay-per-mile model is right for you. Plugging a third party IoT device into your car has already raised serious privacy concerns with data privacy advocates.
Firstly, many insurers are tempted to track more than just the mileage covered and collect sensitive information, such as your exact GPS location. Secondly, IoT devices have a pretty bad reputation for data security. Data breaches and hacking accidents are common due to the inherent security flaws of many of these devices.
In case of IoT devices you use at home, a VPN can be installed directly on a router to encrypt all your traffic and protect you from cyber-attacks. But with a device on the go, such as a mileage tracker, such safety precautions are not possible.
Expensive for Frequent Drivers
Per-per-mile only makes financial sense if you drive rarely and for short distances. Depending on the insurer, low-mileage is defined as somewhere between 3,000 to 6,200 miles a year. This means that you need to be able to predict your car usage with high certainty or else you’ll lose money.
Some of the pay-per-mile insurance plans will also monitor your driving style to award lower premiums to so-called “good drivers”. But what are the criteria for a good driver and how do they determine that? Make sure you have all the information before signing up for a policy of that kind. Otherwise, you might end up being penalized by the company for reckless driving of their definition.
Perfect for City-Dwellers
Pay-per-mile insurance is geared towards low-mileage drivers, such as city dwellers who only drive on the weekends. If one day you find yourself moving to a city where public transport takes you everywhere and you rarely sit behind the wheel anymore, then perhaps pay-per-mile will be a decent money-saver.
The Bottom Line
Unless you trust your insurance provider with putting your cybersecurity first, pay-per-mile plans seem unnecessarily risky. In the world where so much of our data is already out there for advertisers and tech companies to take advantage of, we should be extra careful when adding another device to our lives.
If you don’t want to be tracked but want to save money, look into low-mileage discounts on traditional auto insurance policy plans.
Brad Smith is a technology expert at TurnOnVPN, a non-profit promoting a safe, secure, and censor-free internet. He writes about his dream for a free internet and unravels the horror behind big techs.