Insurance per km?

New product: Nedbank has launched the 'Pay per K' car insurance product where monthly premiums are determined largely on kilometers travelled.

Underwritten by Hollard Insurance, the product is aimed at vehicle owners who travel 1600 kilometres and less per month, with the discount offered upfront.

There is a similar offering which failed in a US state, due to third party insurance issues, and a good chance that any offering in the UK would face the same problem, as they also have compulsory third party rules.

There is no legislative hurdle in SA and no FSB approval was needed as it is very similar to other insurance offering out there, confirms Casserly.

They selected Hollard as they are an innovative organization, and not Mutual and Federal. The premiums or prices are sustainable from an actuarial perspective, says Casserly, although the book is part of the general Nedbank book.

The product differs from other car insurance products in that, in addition to an applicant’s usual insurance risk profile (age, gender, address, type of vehicle, security devices in the vehicle), the actual monthly distance travelled is the one factor that largely influences the premium.

The cell phone industry also provides empirical proof that consumers want to pay for what they use only, and we have learnt lessons.

“We recognise that the less one drives, the less the risk. Why pay as much as someone driving 5000 kms per month if you only drive 500 kms?” says Seamus Casserly, head of Nedbank Group Insurance Brokers.

“This product is ideal for licensed drivers aged between 30 and 65, whose cars are less than 10 years old and who drive 1600 kms and less per month, allowing them to enjoy premium savings and still retain the benefits of comprehensive insurance underwritten by a leading insurance company,” says Casserly.

In order to benefit from the product, it is necessary for car owners to have their actual kilometres travelled recorded on a regular basis.

There is a cross-sell angle as all applications for Pay per K are accepted on the basis that a Nedbank NedFleet Card is used for all fuel purchases for the insured vehicle. “Every time that the vehicle is refuelled, an odometer reading will be recorded on the transaction document.”

“We are strict on the underwriting criteria,” says Casserly. The premium is split into static risk cover, while the bulk is aimed at the mobile risk element, and the payment premium is in arrears. Something that Casserly says is unique.

Some high performance and exotic vehicles are excluded and the value is limited to R1m in value.