Pay-As-You-Drive™ in France
Monday, 29 October 2007

Continuing along the path paved by the British and the Italians, French insurance companies are gearing up to launch their own version of Pay-As-You-Drive™.

After COVEA’s failed attempts in December 2005, it was the insurer AXA who took the lead in convincing the CNIL (National Commission of Information Technology and Privacy Rights) and laying the groundwork for the application of PAYD to a new fleet of vehicles.

 GROUPAMA has also recently received approval from the CNIL to go forward on a series of tests that will examine the reliability of these new technologies, refine the techniques for determining rates, and gain a better understanding of how to implement these new services.

AGF, meanwhile, is already adept at calculating "insurance by the kilometer" using its Sofca network and is counting on the support of its clientele for PAYD.

Although the large majority of French insurers say they are actively pursuing PAYD, their opinions are mixed concerning the implementation of such a project. Three reasons for this hesitation include : 

A weak financial margin in France

The level of insurance premiums in the United Kingdom and Italy are nearly twice as high as those in France. Given this fact, how can you propose a reduction high enough to motivate people to use PAYD ?

Who pays for the start-up costs ?

The costs of investment are numerous from the development, production, and installation of the electronic unit in the vehicle to the transmission and storage of the data. Understandably, drivers cannot be expected to participate if the savings on their premiums do not rapidly make up for the cost of their initial investment

What about restricted market segments

As for the potential of the market, opinions differ. AVIVA and GROUPAMA affirm that there is a real demand while other insurers estimate that this type of insurance will only interest a small segment of drivers such as those with high premiums or those who don’t drive often.

Be that as it may, in 2005 only one insurer took a clear position on the subject, and yet today, many others have rallied to the cause. Numerous insurance companies consider PAYD a commercial development strategy, and each is counting on maintaining a strong position in the most market segments possible. Only one question remains unanswered :

"Which insurance company will be the first in France to propose a dynamic insurance premium for individuals ?"

 

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