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How does pay-per-mile car insurance work from an actuarial perspective? If the lower risk/lower utilizing members pay less, who subsidizes the cost of the higher utilizers, riskier drivers? Or would the riskier drivers foot the bill?
Or do insurance companies assume that there will be enough behavior change, such that premiums will be lower for everybody (so everybody wins)?
The annual claims frequency was divided into the monthly basis, and then the daily basis, and then the per-mile basis. No use, no pay 🙂
Since cost per mile auto insurance more closely matches premiums to real driving risk, I find it interesting. According to what I understand, analysts predict expected claims by combining travel data with variables like driving history and vehicle type. No matter how many miles I travel, unplanned car failures can occur, therefore I also make sure I have a Reliable Towing Service for Car.
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