Australian Insurer Rolls Out “Trust-based” Pay-as-You-Drive Program

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San Francisco, Calif. — Low-mileage drivers now have a new way to reduce the amount they spend on their auto premiums—one that fully protects their privacy. Real Insurance (Australia) and San Francisco-based Exigen Insurance Solutions Inc. announced the successful launch of a trust-based pay-as-you-drive (PAYD) auto insurance product that eliminates the privacy concerns and lowers the technology barriers impeding the introduction of PAYD in world auto insurance markets.

Real Insurance, a part of the Hollard Group of companies, is now offering Australian motorists a usage-based insurance product that allows them to pay only for the kilometers they plan to travel. Exigen Insurance Solutions, which specializes in implementing new business initiatives and products for insurance, served as both a business partner and a technology partner to Real Insurance.

Trust-based PAYD differs from the current market-place PAYD systems in significant ways. Most importantly, it does not require the installation or expense of a telemetry device that communicates driver behavior and odometer readings to the insurer. As a result, it alleviates deep consumer privacy concerns that amount to a privacy penalty for those who want a PAYD product but do not want a monitoring device.

“Collaborating on a trust-based PAYD product was a perfect fit for our business model,” says Gwen Spertell, Exigen Insurance Solutions CEO. “Hollard prides itself on developing innovative products and services for customers, and Exigen itself is committed to redefining how insurers and IT providers can work together in economic alignment.”

Motorists are changing their travel patterns to accommodate the rising cost of gas, increased traffic congestion and environmental concerns, says Roger Grobler, Real Insurance CEO. “Against this backdrop, we felt it was time to offer a PAYD product. We created the first product to not require a monitoring device by enabling customers to report odometer readings.”

TowerGroup Inc., Needham, Mass., released research in November 2007 that profiled PAYD implementation as embodying two principles of innovation insurers must consider in their future plans: be agile, and be willing to accept risk, said Matthew Macauley, senior research associate, TowerGroup. “Most legacy policy administration and actuarial systems are designed with a heavy rating emphasis on insured vehicle year, make and model,” he said. “PAYD has completely altered this to mileage-driven. To adopt this type of pricing model, insurers must have systems that are agile enough to adapt to novel approaches. The systems must be designed to capture data that has never been captured in the past. Agility is key to revolutionizing pricing models. More important, having more accurate pricing models is a crucial component in attracting and retaining profitable customers.”

Grobler says that after a previously unsuccessful policy administration system installation that could not support PAYD, “our search for a competent technology partner brought us to Exigen. Exigen had the complement of integrated policy administration, billing and claims solutions, and a world-class team that was able to meet the challenges associated with designing and bringing to market a completely new way of offering PAYD insurance. We were fortunate to have Exigen as both a technology and business partner with a strong mutual incentive to create a market-friendly, best of breed solution.”

“The success of the implementation also illustrates the robustness of Exigen’s new Billing Lifecycle Management product, which needed to meet specific trust-based PAYD demands,” adds Spertell. “These included high-volume customer notification via phone, Web, fax and mobile device; multiple billing and payment options; and rollover miles and no claim discount functionality.”