Car insurance has been around for almost a century now, with the first compulsory third party (CTP) insurance requirements dating back to 1936. One of the most innovative policies might be the pay as you drive (PAYD) car insurance policy. It’s been around for a while overseas, but only recently has it been an option in Australia. As its name suggests, the PAYD policy means the policyholder pays a premium relative to the distance they drive.

It may seem too good to be true, but the reality is that there’s seen to be a direct correlation between frequency of driving and frequency of collisions. Therefore policyholders who barely drive are seen to be a lower risk (comparatively) to the provider and therefore could benefit from reduced driving premiums. In this article, we define pay as you drive car insurance, detail how KOBA’s innovative pay per kilometre policy works, discuss the factors that can affect your PAYD premiums and list the benefits of becoming a PAYD policyholder. 

What is pay as you drive car insurance?

Pay as you drive car insurance is a type of insurance policy that incurs costs based on distances travelled by a policyholder, typically meaning the less km you drive, the less you pay. But it can be important to note that not every pay as you drive policy is the same. 

If you’re worried that a pay as you drive policy might not have excellent insurance coverage, fear not! Most PAYD policies are actually comprehensive car insurance policies. But keep in mind, not every comprehensive cover is the same. Before you choose a comprehensive pay as you drive insurance, you should review the provider’s product disclosure statement and financial services guide. These informative documents detail all there is to know about a specific provider’s policy.

How does the KOBA Pay Per Km car insurance policy differ from other PAYD policies?

KOBA’s pay-per-KM model puts you in control of the driving premium amount paid. KOBA charges an upfront premium to cover the car from incidences like theft, fire, and weather while it’s parked; and a per km premium from a few cents per km driven. The less you drive, the less you pay.  

Below, you can discover how our pay per kilometre, or pay-as-you-drive, policy works: 

Vehicle connection

Pay Per Km policies work by tracking your vehicle and identifying the kilometres you travel. Some modern cars have connectivity features that allow you to connect to apps and transfer data to providers and car manufacturers. If you have a car with connectivity features, in future you may be able to connect directly to the KOBA App. Currently our policyholders connect through a small telematics device, called the KOBA Rider, to identify your kilometres travelled.

Upon sign-up, Policyholders are issued a KOBA Rider. This device has an OBD-II Port, which began introductions into vehicles in 2006. Once you connect your vehicle through our KOBA Rider device, we can begin tracking your distances and applying your per-KM rate for each KM you drive.

Data collection

As a way of calculating your premiums, we collect various fields of data from your time spent behind the wheel. We take data security very seriously. Below, you can find a list of the information we typically collect:

• location of your car and roads you drive

• date and time of days driven

• distances travelled and the duration of the drives

• speed and acceleration of your car

• the smoothness of your braking and the speed you take corners

• your vehicle identification number and engine fault codes

Payments

As a policyholder with KOBA Insurance you pay two types of premiums: a fixed upfront premium and dynamic driving premium. Your fixed premium refers to a fee you pay annually. When you accept the comprehensive car insurance policy, you pay the fixed premium amount upfront. You also pay this premium at the beginning of a policy renewal, which is annual. This premium covers you for any incidents that might happen while you’re not driving. This may include incidents such as accidents, environmental damage, fire or theft while your car is parked.

The second fee is the driving premium. This is where the pay per kilometre feature comes into play. Before accepting the policy, we calculate your per kilometre rate, which is multiplied by the number of kilometres you drive and charged at the end of each billing month.  So the policy incorporates both an annual and monthly payment. There’s an additional annual fee, known as the KOBA Admin Fee. This fee is $55, which you pay with your fixed premiums. 

Capped kilometres

An excellent feature that we incorporate in our policy is the capped kilometres feature. Some insurance providers may charge you for every kilometre you drive, regardless of how many you clock. This could lead to a large bill at the end of the month if you happen to have a busy time on the road. Some providers may also detail a specific distance where if an incident occurs, you have to pay an additional excess fee.

Fortunately, we understand that you might have an occasional busy month that requires travelling every now and then. Instead of charging you for every single kilometre you drive with no limit, we charge you up to 250km travelled in one day or 1,750km in one month. So, if you occasionally happen to drive 1,900km in one month, you’ll only pay per kilometre up to 1,750km. If you continue to exceed the kilometre cap, we might have to reassess your policy and if it’s the right cover for your needs as our policies are designed for low-usage drivers.

Typical factors affecting your policy premiums

You might wonder how insurance providers calculate your premiums, particularly if you’re on a pay per kilometre policy. It’s helpful to understand that your premiums may come down to a variety of different factors. Below, you can explore a list of typical factors affecting your policy premiums, which could include, but is not limited to:

• make and model of your car

• your car’s agreed value

• where you store your car, such as in a garage, underground car park or verge

• your age or the age of the policyholder

• your claims history

• what you use your car for, i.e. work, recreation, general travel

• whether you have finance on your car

• GST and government charges
• administration expenses regarding your specific policy 

Benefits of a PAYD car insurance policy

So, now you may understand how pay as you drive car insurance policies work but are they better than other options available? The answer to that question can be subjective, but if you rarely drive long distances, this style of comprehensive cover may be worth considering. Below, you can find details on the typical benefits people may find when choosing a PAYD insurance policy:

• Lower premiums: The most glaring benefit is that you’re likely to pay reduced premiums (provided you don’t drive often), so you could save compared to other policies.

• Comprehensive cover: Along with a possible reduction in premiums, you may get all the benefits from comprehensive car insurance. This may include cover against damages from other drivers, environmental conditions, accidents, fire and theft.
• Streamlined claims process: If you’re with a provider like KOBA, in future, they could collect valuable information from your vehicle that may help streamline a car insurance claim process.  

The KOBA solution

In your search for comprehensive car insurance, it might be an idea to consider KOBA’s Comprehensive Car Insurance. With comprehensive cover, advanced technology and kilometre caps for when you occasionally drive long distances, KOBA Insurance could be an option for you.

Get a quote today.

Any advice provided on this site is general advice only and does not take into account your individual needs, objectives or financial situation. Terms, limits, conditions and exclusions apply. Before making a decision, you should carefully read the Product Disclosure Statement & Financial Services Guide (PDS & FSG), and the Target Market Determination (TMD), which are available at www.kobainsurance.com.au to help you decide if the product is right for you. If you purchase a policy, KOBA receives a commission, which is a percentage of your premium, and may be entitled to a profit share if certain thresholds are met in agreed periods. Please ask us for more details.