Car insurer launches UK’s first ever pay-as-you-go policy

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The UK’s first ever pay-as-you-go car insurance policy has been launched, specially targeting motorists who only drive occasionally.

The service, from Edinburgh-based car insurer Cuvva, was inspired by apps such as Uber and Deliveroo and promises to provide motorists with greater control over their car insurance costs by only charging them for the hours they drive.

The pay-as-you-go car insurance will cost from £1.20 per hour, as well as a rolling £10-£30 monthly subscription to cover the vehicle when it isn’t in use.

Cuvva said the specialist car insurance product is aimed mostly at young people who typically pay the highest car insurance premiums. The average cover for young drivers currently stands at over £2,000 per year, so pay-as-you-go insurance could be a very attractive option.

The pay-as-you-go policy from Cuvva is designed for motorists who plan to drive less than 4,000 miles per year.

Cuvva already sells cover on a temporary ‘by-the-hour’ basis which is aimed at motorists who need to drive a friend or family members vehicle for a short period of time, and this new policy goes further to target the six million drivers in the UK who are deemed by the DVLA to drive ‘very infrequently’.

Cuvva says that these low-mile drivers are forced to pay relatively high car insurance premiums when their time on the road is taken into account, effectively subsiding higher-mileage motorists.

How does it work?

Cuvva’s pay as you go car insurance is priced at between £10 – £30 per month which covers the vehicle for when it is not in use i.e. when it’s parked at home. This monthly subscription is then topped by an hourly fee for each hour spent driving, which starts at £1.20 per hour.

Cover for one car only

Whereas the existing ‘by-the-hour’ policy offered by Cuvva, which enables motorists to drive any car, this new pay as you go cover is for one vehicle only. This means if two people share a car then they would both need a subscription-based pay-as-you-go policy.

As with conventional motor insurance, policyholders will build up a no claims discount at the end of a 12-month subscription, which is then fully transferable.

Unlike normal car insurance though, the monthly subscription can be cancelled at any time with no cancellation fee. Although motorists need to be aware that they will need some form of cover or have to declare their car SORN, or face a fine from the DVLA.

How much could you save with PAYG insurance?

It’s no secret that car insurance premiums are rising, with recent estimates suggesting the average premium cost increased by £767 last year – with young drivers having to pay an estimated £2,122 per year for cover.

Cuvva says their new ‘subscription-based’ policy could save motorists who drive infrequently up to 70% on their annual premium, which could add up to £1,500.

Cuvva’s founder and CEO Freddy Macnamara, says the idea for pay-as-you-go car insurance came to him after using Uber and Deliveroo. He said:

“It was ridiculous that I couldn’t borrow a car for an hour, because of the difficulty of getting short-term cover,” he said.

“I could order an Uber or a Deliveroo to my house, but I couldn’t buy insurance for a short period quickly.

“We realised that we could use the same mechanism to save infrequent drivers a huge amount of money.

“Technology has changed so many industries and given consumers cheaper, more convenient alternatives. Yet car insurance continues to be opaque and inflexible, costing some people a lot more than it should.

“Whether it is borrowing a car from a friend for a short period of time, or owning a car that you don’t drive much, many people get an unfair deal when it comes to car insurance.”

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