LOW MILEAGE DRIVERS COULD SAVE OVER £140 BY SWITCHING TO PAY-BY-MILE INSURANCE

• Monthly switching to By Miles’s pay-by-mile policies has risen by 125% since the start of 2020
• Usage-based insurance could save the increasing number of low mileage drivers an average of £141 per year, which could help offset the rising cost of living
• Average cost of a pay-per-mile policy is £585, but this falls to £430 for motorists who drive less than 5,000 miles per year, and £306 for motorists who drive less than 2,000 miles per year
• Insurance quotes for pay-per-mile policies are cheaper for nearly one in five motorists (18%) who drive less than 5,000 miles per year

Almost a fifth of motorists (18%) who drive less than 5,000 miles per year could save £123 on average by swapping to a pay-by-mile policy instead of an annual car insurance policy, according to new research from comparethemarket.com.

This type of pay-as-you-go car insurance is continuing to grow in popularity as the proportion of drivers switching to a pay-by-mile provider, By Miles, has risen by 125% year-on-year since the start of 2020. The increasing number of drivers choosing a pay-per-mile policy follows a recent survey from comparethemarket.com that found that almost half of motorists (49%) are making fewer journeys, and 31% are using less fuel to help mitigate rising driving costs. Many motorists are now looking to reduce costs as one in three drivers (33%) is worried that they won't be able to cover the cost of driving in the coming weeks. 

Pay-by-mile policies are typically aimed at motorists who drive less than the nation’s average mileage each year. The policies are designed to be a fairer option for low mileage drivers because these motorists use their cars less often, and so are less likely to have an accident or make a claim. Pay-per-mile policies typically use a telematics device to ensure motorists only pay for insurance for the miles they drive. The policies could also appeal to drivers who are working from home more often following the COVID-19 pandemic. More than six in ten motorists (64%) now drive less than 7,000 miles per year, according to MOT data analysis from By Miles.

The fewer miles motorists drive, the more likely they are to save by switching to a pay-per-mile policy. Pay-per-mile policies are cheaper for one in three motorists (33%) who drive for less than 2,000 miles per year. These drivers could typically save an average of £141 by switching to a pay-per-mile policy. The average annual cost of a pay-per-mile policy is £585, but this falls to £430 for motorists who drive less than 5,000 miles per year, and £306 for motorists who drive less than 2,000 miles per year.

Alex Hasty, director at comparethemarket.com, comments:

"Motorists are increasingly driving fewer miles each year, whether that’s to save money or to do their bit for the environment. Many may also be working from home more often following the pandemic, and do not need to commute to work as frequently. 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. 

"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. Drivers can make sure they have the right insurance policy suited to their needs by shopping around when their policy comes up for renewal. With comparethemarket.com, customers can also set up automated car insurance renewal quotes and be notified ahead of their renewal date to help them find great deals and save money.” 

James Blackham, CEO at By Miles, said:

“The cost-of-living crisis is baring its teeth for drivers - with fuel, repairs and the price of cars on the rise - so it was sadly not a surprise to learn that many of us are having to make changes.

“The decline in mileage isn’t new, as a nation we’ve been driving less each year for over a decade - yet premiums with traditional insurance policies haven’t followed this trend.

“Pay-by-mile insurance means that the less you drive, the more you save - so if your car is parked up then so are your premiums. At a time when the cost of driving is through the roof, it might make sense to switch to pay-by-mile if you are a low mileage driver.”