British RAC employs DriveTag for pay-by-mile insurances

Due to the COVID-19 pandemic a different type of mobility need has developed. This is especially true for the insurance- and leasing market. RAC (Royal Automobile Club) is a great example of a company adapting to these market changes. The shift in mobility needs gave RAC cause to start basing their insurance premiums on miles driven, and using Sycada’s DriveTag to do so.

A fair system
At one point in time RAC noticed that 36% out of all their insurance applications came from drivers driving less than 6000 miles a year. They also noticed that most of these drivers were between 25 and 36 years old. It’s fair to state that this is an ‘underserved market’, due to these drivers paying a relatively high premium for the amount of miles traveled each year. As a result of the COVID-19 crisis their mobility has decreased even more, and for this same reason this group has since increased in size. It is now estimated to consist of about 8 million drivers in the UK. RAC wanted to transition to a system fairer than the one previously used, one where insured drivers would only pay for the miles they actually drove. To make such a ‘pay-by-mile’ system work, miles driven had to be registered as accurately as possible.

Pay when you drive, save when you don’t
Some time ago, while searching for a fitting registration tool, RAC encountered Sycada. An extensive market scan was conducted and the research showed Sycada to be the most suitable option. Using the motto ‘Pay when you drive, save when you don’t’ RAC is primarily focusing on millennials. This group seems to value their mobile phones even more than their rides and stays online almost 24/7. Having grown up in the digital era, this group is very open to trying out new technologies and gadgets. Since DriveTag is based on smartphone use RAC figured it would be the perfect tool for them. Next to tracking mileage, the accompanying app also shows you exactly when and where a trip was made.

DriveTag ‘Mindful Miles’
The new system, which went live on May 8th 2021, has policyholders paying a low basic premium supplemented by a variable premium based on the amount of miles traveled. RAC is releasing DriveTag onto the market under their own brand and is expecting to have roughly 100.000 policyholders driving around with the little device in their car within five years. Because the DriveTag was developed for ‘mindful driving’, a more energy sufficient way of driving with lowered risk of damages, it is subsequently used as data input for mobility budgets. Within this context the DriveTag is also very suitable to use as an addition to existing mobility maps, currently being used to register the use of public transport, bikes and taxis.

‘Post-corona’ mobility
Solutions such as these offer employees a lot of flexibility and reduce administrative load for employers. Expectations are for mobility to have a permanently different (read: more flexible) implementation in the post-corona era. Amongst other things, this will have consequences for leasing contracts. Throughout this process of flexibilisation we expect the DriveTag to play a great role.

Read RAC’s entire Pay by Mile proposition in their own words here.