Could Pay-Per-Mile Insurance Work For You?

Thu 16th Jun 2022

The concept of paying for your motor insurance based on the amount of miles you travel in your car is a relatively new idea, but new research has found that many drivers might be better off with a pay-as-you-go policy.

The popularity of pay-per-mile insurance grew during the pandemic when people who were furloughed or working from home saw their car use fall significantly. This led to some insurers giving a rebate or cheaper policies, but there was no doubt that the insurance industry made healthy profits out of the Covid-19 crisis.

Clearly pay-as-you-go won’t suit all motorists, particularly those who have a heavy daily mileage, but according to analysis from Compare the Market one in five drivers could save money by making the switch.

The research from the leading price comparison website found that those driving less than 2,000 miles a year could save up to £150, and even those who travel in the region of 7,500 or less could even save money.

Most pay-by-mile policies use black-box tracker technology to monitor the amount of miles driven, and with many car owners looking to cut back on their mileage due to the cost of fuel, it only makes sense that the insurance costs would reflect this.

“Motorists are increasingly driving fewer miles each year, whether that's to save money or to do their bit for the environment,” said Alex Hasty, director at Compare the Market.

“Many may also be working from home more often following the pandemic, and do not need to commute to work as frequently. 

“Pay-per-mile policies may also benefit motorists who are unsure about how often they will use their cars, as any payments will be based on the miles driven each month, rather than their expected annual mileage.”

According to the data, motorists can expect to pay an average of £585 for an annual pay-per-mile policy, but this falls significantly for those who drive fewer than 5,000 miles.

Hasty said: “Our research shows that switching to a pay-per-mile policy could save low mileage drivers more than £100. 

“Given the cost-of-living crisis, these savings could help drivers who are looking to cut driving costs.

“Drivers can make sure they have the right insurance policy suited to their needs by shopping around when their policy comes up for renewal.”