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    Drive insurance

    Concept
    The simplest form of usage-based insurance bases the insurance costs simply on distance driven. However, the general concept of pay as you drive includes any scheme where the insurance costs may depend not just on how much you drive but how, where, and when one drives.[1]
    Pay as you drive (PAYD) means that the insurance premium is calculated dynamically, typically according to the amount driven. There are three types of usage-based insurance:
    Coverage is based on the odometer reading of the vehicle.
    Coverage is based on mileage aggregated from GPS data, or the number of minutes the vehicle is being used as recorded by a vehicle-independent module transmitting data via cellphone or RF technology.[2]
    Coverage is based on other data collected from the vehicle, including speed and time-of-day information, historic riskiness of the road, driving actions in addition to distance or time travelled.
    The formula can be a simple function of the number of miles driven, or can vary according to the type of driving or the identity of the driver. Once the basic scheme is in place, it is possible to add further details, such as an extra risk premium if someone drives too long without a break, uses their mobile phone while driving, or travels at an excessive speed.
    Telematic usage-based insurance (i.e. the latter two types, in which vehicle information is automatically transmitted to the system) provides a much more immediate feedback loop to the driver,[1] by changing the cost of insurance dynamically with a change of risk. This means drivers have a stronger incentive to adopt safer practices. For example, if a commuter switches to public transport or to working at home, this immediately reduces the risk of rush hour accidents. With usage-based insurance, this reduction would be immediately reflected in the cost of car insurance for that month.
    The smartphone as measurement probe for insurance telematics has been surveyed[3]
    Another form of usage-based insurance is PHYD (Pay How You Drive). Similar to PAYD, but also brings in additional sensors like accelerometer to monitor driving behavior.[4]
    Potential benefits
    Social and environmental benefits from more responsible and less unnecessary driving.
    Commercial benefits to the insurance company from better alignment of insurance with actual risk. Improved customer segmentation.
    Potential cost-savings for responsible customers.
    Technology that powers UBI/PAYD enables other vehicle-to-infrastructure solutions including drive-through payments, emergency road assistance, etc.
    More choice for consumers on type of car insurance available to buy.
    Social benefits from accessibility to affordable insurance for young drivers — rather than paying for irresponsible peers, with this type of insurance young drivers pay for how they drive.
    Higher-risk drivers pay most per use, thus have highest incentive to change driving patterns or get off the roads, leaving roads more safe.[5][6]
    For telematic usage-based insurance: Continuous tracking of vehicle location enhances both personal security and vehicle security. The GPS technology could be used to trace the vehicle whereabouts following an accident, breakdown or theft.[7]
    The same GPS technology can often be used to provide other (non insurance) benefits to consumers, e.g. satellite navigation.[7]
    Gamification of the data encourages good driver behavior by comparison with other drivers.[6]
    Potential drawbacks
    There are limits to the ability of any insurance system to predict future risk, including usage-based insurance. Some lower-risk drivers will still subsidize some higher-risk drivers, to some extent.
    For usage pricing, driving habits must be documented, raising privacy concerns especially in the case of systems which use continuous GPS tracking of vehicles.[2][8] Personal information such as where you drive may also be inferred using only data such as speed and distance driven.[9][10]
    Pricing plans based on behavior may be harder to compare between insurance companies, making it more difficult for consumers to price shop and reducing competition.
    Implementations
    USA
    Metromile
    Metromile is a usage-based insurance startup funded by New Enterprise Associates, Index Ventures, National General Insurance/Amtrust Financial, and other investors. It offers a driving app and a pay-per-mile insurance product using a device that connects to the OBD-II port of all automobiles built after 1996. Metromile does not use behavioral statistics like type of driving or time of day to price their insurance. They offer consumers a fixed base rate per month plus a per-mile-rate ranging from 2 to 11 cents per mile, taking into account all traditional insurance risk factors. Drivers who drive less than the average (10,000 miles a year) will tend to save.
    Metromile allows users to opt out of GPS tracking, never sells consumer data to 3rd parties, and does not penalize consumers for behavioral driving habits. Metromile is currently licensed to sell auto insurance in California, New Jersey, Oregon, Pennsylvania, Washington, Virginia and Illinois .[11][12][13] More states are expected to roll out shortly.
    Progressive
    Snapshot is a car insurance program developed by Progressive Insurance in the United States.[14][15] It is a voluntary, behavior-based insurance program that gives drivers a customized insurance rate based on how, how much, and when their car is driven. Snapshot is currently available in 46 states plus the District of Columbia. Because insurance is regulated at the state level, Snapshot is currently not available in Alaska, California, Hawaii, and North Carolina.[15]
    Driving data is transmitted to the company using an on-board telematic device. The device connects to a car’s OnBoard Diagnostic (OBD-II) port (all automobiles built after 1996 have an OBD-II.) and transmits speed, time of day and number of miles the car is driven. Cars that are driven less often, in less risky ways and at less risky times of day can receive large discounts. Progressive has received patents on its methods and systems of implementing usage-based insurance and has licensed these methods and systems to other companies.[16] Progressive has service marks pending on the terms Pay As You Drive and Pay How You Drive.
    Allstate
    Allstate’s usage-based insurance program, Drivewise, began in 2010,[17] with the company launching a mobile app version in 2014.[18] The Drivewise app rewards safe driving by analyzing speed, braking, and time of day to calculate cash rewards and/or savings on a customer’s auto insurance premium.[19] The app provides feedback on each trip taken and offers tips for safe driving.
    As of May 2016, Drivewise is available in 48 of 50 states plus D.C. (all but CA, NC).[20] The majority of states offer Drivewise through the app, while seven states (AK, FL, IN, MA, NY, OH, WA) currently only offer it through a car plug-in device.
    After downloading the Drivewise app and enabling location services, Drivewise will automatically detect trips. Both Allstate and non-Allstate customers can download the Drivewise app and use it to receive safe driving tips as well as Allstate Rewards points, which can be redeemed for savings on brand-name merchandise through a separate website.[21]
    Liberty Mutual Insurance
    Onboard Advisor is a commercial lines pay-how-you-drive, PHYD It offers up to 40% discount to commercial and private fleets based on how safely they actually drive.
    National General Insurance
    National General Insurance is one of the first and largest auto insurance companies to institute a Pay-As-You-Drive (PAYD) program in the United States back in 2004.[22] The National General Insurance Low-Mileage Discount is an innovative program offered to OnStar subscribers in 34 states, where those who drive less pay less on their auto insurance.
    This opt-in program is the first of its kind[23] leveraging state-of-the-art technology using OnStar to allow customers who drive fewer miles to benefit from substantial savings. Eligible active OnStar subscribers sign up to save on their premiums if they drive less than 15,000 miles annually. Subscribers who drive even less than that can save even more (up to 54%).[24]
    Under the program, new National General Insurance customers receive an automatic insurance discount of approximately 26 percent[25] upon enrollment (existing OnStar customers receive a discount based on historical mileage).
    With the subscriber’s permission, the odometer reading from his or her monthly OnStar Vehicle Diagnostics report is forwarded to National General Insurance. Based on those readings, the company will decrease the premium using discount tiers corresponding to miles driven.
    Information sent from OnStar to National General Insurance pertains solely to mileage,[26] and no additional data is gathered or used for any purpose other than to help manage transportation costs. Customers who drive more than 15,000 miles per year are not penalized and all OnStar customers receive an insurance discount simply for having an active OnStar subscription.
    Japan
    AIOI
    AIOI introduced a Pay as You Drive insurance product in Japan in 2005. They partnered with Toyota to develop the technology. The technology is based on Toyota’s G-Book terminals.[27]
    Australia
    Real Insurance
    Pay As You Drive is the world’s first trust-based product developed in Australia by Real Insurance. It solves a number of the problems that especially location-based solutions face, particularly privacy issues and variable premiums. Customers pay a minimum premium, and then pre-pay for kilometers.
    QBE
    Insurance Box is the first telemetry-based insurance system in Australia, and uses telemetry from a device plugged into the vehicle’s OBD II port. The telemetry is used to rate driver behavior, and provide this via a «DriveScore» to the insured. Premiums are adjusted annually.[28]
    EU
    Mapfre and Generali offer their Pay as you go policies in Spain since 2007, primarily for 18–30 years clients.[citation needed] In Italy SARA Assicurazioni was the first insurance company to launch a pay per use product in 2003.[citation needed]
    UK
    The Floow Limited is a global telematics provider that provides complete telematics solutions to many of the large Insurance or Automotive firms globally. The UK’s largest motor insurance firm Direct Line Group is a UK example, others worldwide include AIG, RSA, AAA, car companies such as Renault, Nissan and other world telematic leaders. The Floow Limited provided the world’s first smartphone only policies, the world’s first OBD bluetooth device policies and many early automotive telematics insurance products white labelled to global clients. The Floow Limited are recognised with UK’s highest business innovation award for these efforts Queen’s Award for Enterprise and have accompioned[clarification needed] several UK prime minister trade missions to highlight the UK’s leading Telematic technology expertise globally. These efforts highlighted direct praise for supporting growth of the tech sector in the north of England by the UK prime minister Theresa May.[29]
    By Miles is a UK car insurance start-up that offers pay-per-mile insurance using telemetry from a device plugged into the vehicle’s OBD II port.[30] They offer consumers a fixed base rate per month plus a per-mile-rate, taking into account all traditional insurance risk factors.[31]
    IRIS
    The International Research and Intelligent Systems Global (IRIS) company’s Pay As You Drive and Fleet Risk Management products won Strategic Risk magazine’s «European Risk Management Product of the Year 2008». These products are currently under evaluation by two major insurance companies.[32] IRIS is located in Coventry, United Kingdom.
    Tests
    A number of tests of telematic auto insurance are currently underway or recently completed. These tests are being conducted in many different countries. They include:
    King County, Washington, United States: 5000 person trial by Unigard Insurance with US$1.9 million in federal funding[33]
    Sweden, 250 000 km trial during 2013 using the smartphone as sensor by the insurer If.[34]
    History
    Widespread use of the automobile began after the First World War in urban areas. Cars were relatively fast and dangerous by that stage, yet there was still no compulsory form of car insurance anywhere in the world. This meant that injured victims would seldom get any compensation in an accident, and drivers often faced considerable costs for damage to their car and property.
    A compulsory car insurance scheme was first introduced in the United Kingdom with the Road Traffic Act 1930. This ensured that all vehicle owners and drivers had to be insured for their liability for injury or death to third parties whilst their vehicle was being used on a public road.[1] Germany enacted similar legislation in 1939 called the «Act on the Implementation of Compulsory Insurance for Motor Vehicle Owners.»[2]
    Public policies
    In many jurisdictions, it is compulsory to have vehicle insurance before using or keeping a motor vehicle on public roads. Most jurisdictions relate insurance to both the car and the driver; however, the degree of each varies greatly.
    Several jurisdictions have experimented with a «pay-as-you-drive» insurance plan which utilizes either a tracking device in the vehicle or vehicle diagnostics. This would address issues of uninsured motorists by providing additional options and also charge based on the miles (kilometers) driven, which could theoretically increase the efficiency of the insurance, through streamlined collection.[3]
    Australia
    In Australia, Compulsory Third Party (CTP) insurance is a state-based scheme that covers only personal injury liability. Comprehensive and Third Party Property Damage insurance are sold separately.
    Comprehensive insurance covers damages to third-parties and the insured property and vehicle.
    Third Party Property Damage insurance covers damage to third-party property and vehicles, but not the insured vehicle.
    Third Party Property Damage with Fire and Theft insurance additionally covers the insured vehicle against fire and theft.
    Compulsory Third Party Insurance
    CTP insurance is linked to the registration of a vehicle. It is transferred when an already registered vehicle is sold. It covers the vehicle owner and any person who drives the vehicle against claims for liability in respect of the death or injury to people caused by the fault of the vehicle owner or driver, but not for damage. A Compulsory Third Party Insurance is the coverage which covers the third party with the repairing cost of the vehicle, any property damage or medication expenses which are encountered as a result of an accident by the insured. This may include any kind of physical damage, bodily injuries or damage to property and covers the cost of all reasonable medical treatment for injuries received in the accident, loss of wages, cost of care services, and in some cases compensation for pain and suffering. Notably, the motorist or the insured is responsible for his own loss as he is not covered for any loss in such type of insurance.
    In New South Wales and the Northern Territory CTP insurance is compulsory; each vehicle must be insured when registered. A ‘Greenslip,'[4] another name by which CTP insurance is commonly known due to the colour of the form, must be obtained through one of the five licensed insurers in New South Wales. Suncorp and Allianz both hold two licences to issue CTP Greenslips – Suncorp under the GIO and AAMI licences and Allianz under the Allianz and CIC/Allianz licences. The remaining three licences to issue CTP Greenslips are held by QBE, Zurich and Insurance Australia Limited (NRMA). APIA and Shannons and InsureMyRide insurance also supply CTP insurance licensed by GIO. In addition to the Greenslip, additional car insurance can be purchased through insurers in Australia. This will cover claims that the standard CTP insurance cannot provide. This is known as a comprehensive car insurance.
    A similar scheme applies in the Australian Capital Territory through AAMI, GIO and NRMA (IAL).
    In Victoria, Third Party Personal insurance from the Transport Accident Commission is similarly included, through a levy, in the vehicle registration fee.[5] A similar scheme exists in Tasmania through the Motor Accidents Insurance Board.[6]
    In Queensland, CTP is a mandatory part of registration for a vehicle. There is choice of insurer but price is government controlled in a tight band.[7]
    In South Australia, Third Party Personal insurance from the Motor Accident Commission is included in the licence registration fee for people over 17.[8] A similar scheme applies in Western Australia, though there is only one CTP insurer, the Insurance Commission of Western Australia (ICWA).[9]
    Canada
    Several Canadian provinces (British Columbia, Saskatchewan, Manitoba and Quebec) provide a public auto insurance system while in the rest of the country insurance is provided privately [third party insurance is privatized in Quebec and is mandatory. The province covers everything but the vehicle(s)].[10] Basic auto insurance is mandatory throughout Canada with each province’s government determining which benefits are included as minimum required auto insurance coverage and which benefits are options available for those seeking additional coverage. Accident benefits coverage is mandatory everywhere except for Newfoundland and Labrador.[11] All provinces in Canada have some form of no-fault insurance available to accident victims. The difference from province to province is the extent to which tort or no-fault is emphasized. International drivers entering Canada are permitted to drive any vehicle their licence allows for the 3-month period for which they are allowed to use their international licence. International laws provide visitors to the country with an International Insurance Bond (IIB) until this 3-month period is over in which the international driver must provide themselves with Canadian Insurance. The IIB is reinstated every time the international driver enters the country. Damage to the driver’s own vehicle is optional – one notable exception to this is in Saskatchewan, where SGI provides collision coverage (less than a $1000 deductible, such as a collision damage waiver) as part of its basic insurance policy.[12] In Saskatchewan, residents have the option to have their auto insurance through a tort system but less than 0.5% of the population have taken this option.[13]
    Germany
    International Motor Insurance Card (IVK)
    Since 1939, it has been compulsory to have third party personal insurance before keeping a motor vehicle in all federal states of Germany.[2] In addition, every vehicle owner is free to take out a comprehensive insurance policy. All types of car insurance are provided by several private insurers. The amount of insurance contribution is determined by several criteria, like the region, the type of car or the personal way of driving.[14]
    The minimum coverage defined by German law for car liability insurance / third party personal insurance is: 7.5 million euro for bodily injury (damage to people), .5 million euro for property damage and 50,000 euro for financial/fortune loss which is in no direct or indirect coherence with bodily injury or property damage.[15] Insurance companies usually offer all-in/combined single limit insurances of 50 Million Euro or 100 Million Euro (about 141 Million Dollar) for bodily injury, property damage and other financial/fortune loss (usually with a bodily injury coverage limitation of 8 to 15 million euro for each bodily injured person).
    Hong Kong
    According to section 4(1) of the Motor Vehicles Insurance (Third Party Risks) Ordinance (Cap. 272 of the Laws of Hong Kong), all users of a car, include its permitted users, must have insurance or some other security with respect to third-party risks.[16]
    Hungary
    Third-party vehicle insurance is mandatory for all vehicles in Hungary. No exemption is possible by money deposit. The premium covers all damage up to HUF 500M (about €1.8M) per accident without deductible. The coverage is extended to HUF 1,250M (about €4.5M) in case of personal injuries. Vehicle insurance policies from all EU-countries and some non-EU countries are valid in Hungary based on bilateral or multilateral agreements. Visitors with vehicle insurance not covered by such agreements are required to buy a monthly, renewable policy at the border.[17]
    Indonesia
    Third-party vehicle insurance is a mandatory requirement in Indonesia and each individual car and motorcycle must be insured or the vehicle will not be considered legal. Therefore, a motorist cannot drive the vehicle until it is insured. Third Party vehicle insurance is included through a levy in the vehicle registration fee which is paid to the government agency Samsat (Sistem Administrasi Manunggal di bawah Satu Atap), which is responsible for cars and roads.[18] Third-Party Vehicle Insurance is regulated under Act No. 34 Year 1964 Re: Road Traffic Accident Fund and merely covers Bodily injury, and managed by a SOE named PT. Jasa Raharja (Persero).[19] The Indonesian government has a road insurance fund which includes life insurance for traffic accidents. The annual fee is called the Compulsory Contribution Fund for Traffic Accidents or Sumbangan Wajib Dana Kecelakaan Lalu Lintas Jalan.[18]
    India
    A Sample Vehicle Insurance Certificate in India
    Auto insurance in India deals with the insurance covers for the loss or damage caused to the automobile or its parts due to natural and man-made calamities. It provides accident cover for individual owners of the vehicle while driving and also for passengers and third party legal liability. There are certain general insurance companies who also offer online insurance service for the vehicle.
    Auto insurance in India is a compulsory requirement for all new vehicles used whether for commercial or personal use. The insurance companies have tie-ups with leading automobile manufacturers. They offer their customers instant auto quotes. Auto premium is determined by a number of factors and the amount of premium increases with the rise in the price of the vehicle. The claims of the auto insurance in India can be accidental, theft claims or third party claims. Certain documents are required for claiming auto insurance in India, like duly signed claim form, RC copy of the vehicle, driving license copy, FIR copy, original estimate and policy copy.
    There are different types of auto insurance in India:
    Private Car Insurance – Private Car Insurance is the fastest growing sector in India as it is compulsory for all the new cars. The amount of premium depends on the make and value of the car, state where the car is registered and the year of manufacture. This amount can be reduced by asking the insurer for No Claim Bonus (NCB) if no claim is made for insurance in previous year.[20]
    Two Wheeler Insurance – The Two Wheeler Insurance in India covers accidental insurance for the drivers of the vehicle. The amount of premium depends on the current showroom price multiplied by the depreciation rate fixed by the Tariff Advisory Committee at the beginning of a policy period.
    Commercial Vehicle Insurance – Commercial Vehicle Insurance in India provides cover for all the vehicles which are not used for personal purposes like trucks and HMVs. The amount of premium depends on the showroom price of the vehicle at the commencement of the insurance period, make of the vehicle and the place of registration of the vehicle. The auto insurance generally includes:
    Loss or damage by accident, fire, lightning, self ignition, external explosion, burglary, housebreaking or theft, malicious act
    Liability for third party injury/death, third party property and liability to paid driver
    On payment of appropriate additional premium, loss/damage to electrical/electronic accessories
    The auto insurance does not include:
    Consequential loss, depreciation, mechanical and electrical breakdown, failure or breakage
    When vehicle is used outside the geographical area
    War or nuclear perils and drunken driving
    Ireland
    The Road Traffic Act, 1933 requires all drivers of mechanically propelled vehicles in public places to have at least third-party insurance, or to have obtained exemption – generally by depositing a (large) sum of money to the High Court as a guarantee against claims. In 1933, this figure was set at £15,000.[21] The Road Traffic Act, 1961[22] (which is currently in force) repealed the 1933 act but replaced these sections with functionally identical sections.
    From 1968, those making deposits require the consent of the Minister for Transport to do so, with the sum specified by the Minister.
    Those not exempted from obtaining insurance must obtain a certificate of insurance from their insurance provider, and display a portion of this (an insurance disc) on their vehicles’ windscreen (if fitted).[23] The certificate in full must be presented to a police station within ten days if requested by an officer. Proof of having insurance or an exemption must also be provided to pay for the motor tax.[24]
    Those injured or suffering property damage/loss due to uninsured drivers can claim against the Motor Insurance Bureau of Ireland’s uninsured drivers fund, as can those injured (but not those suffering damage or loss) from hit and run offences.
    Italy
    The law 990/1969 requires that each motor vehicle or trailer standing or moving on a public road have third party insurance (called RCA, Responsabilità civile per gli autoveicoli). Historically, a part of the certificate of insurance must be displayed on the windscreen of the vehicle. This latter requirement was revoked in 2015, when a national database of insured vehicles was built by the Insurance Company Association (ANIA, Associazione Nazionale Imprese Assicuratrici) and the National Transportation Authority (Motorizzazione Civile) to verify (by private citizens and public authorities) if a vehicle is insured. There is no exemption policy to this law disposition.
    Driving without the necessary insurance for that vehicle is an offence that can be prosecuted by the police and fines range from 841 to 3,287 euros. Police forces also have the power to seize a vehicle that does not have the necessary insurance in place, until the owner of the vehicle pays a fine and signs a new insurance policy. The same provision is applied when the vehicle is standing on a public road.
    Minimal insurance policies cover only third parties (including the insured person and third parties carried with the vehicle, but not the driver, if the two do not coincide). Also the third parties, fire and theft are common insurance policies, while the all inclusive policies (kasko policy) which include also damages of the vehicle causing the accident or the injuries. It is also common to include a renounce clause of the insurance company to compensate the damages against the insured person in some cases (usually in case of DUI or other infringement of the law by the driver).
    The victims of accidents caused by non-insured vehicles could be compensated by the Road’s Victim Warranty Fund (Fondo garanzia vittime della strada), which is covered by a fixed amount (2.5%, as 2015) of each RCA insurance premium.
    New Zealand
    Within New Zealand, the Accident Compensation Corporation (ACC) provides nationwide no-fault personal injury insurance.[25] Injuries involving motor vehicles operating on public roads are covered by the Motor Vehicle Account, for which premiums are collected through levies on petrol and through vehicle licensing fees.[26]
    Norway
    In Norway, the vehicle owner must provide the minimum of liability insurance for his vehicle(s) – of any kind. Otherwise, the vehicle is illegal to use. If a person drives a vehicle belonging to someone else, and has an accident, the insurance will cover for damage done. Note that the policy carrier can choose to limit the coverage to only apply for family members or person over a certain age.
    Romania
    Romanian law mandates Răspundere Auto Civilă, a motor-vehicle liability insurance for all vehicle owners to cover damages to third parties.[27]
    Russian Federation
    Motor-vehicle insurance is mandatory for all owners according to Russian legislation.
    South Africa
    South Africa allocates a percentage of the money from fuel into the Road Accident Fund, which goes towards compensating third parties in accidents.[28][29]
    Spain
    Each motor vehicle on a public road to have a third party insurance (called «Seguro de responsabilidad civil»).
    Police forces have the power to seize vehicles that do not have the necessary insurance in place, until the owner of the vehicle pays the fine and signs a new insurance policy. Driving without the necessary insurance for that vehicle is an offence that will be prosecuted by the police and will receive penalty. Same provision is applied when the vehicle is standing on a public road.
    The minimal insurance policies cover only third parties (included the insured person and third parties carried with the vehicle, but not the driver, if the two do not coincide). Also the third parties, fire and theft are common insurance policies.
    The victims of accidents caused by non-insured vehicles could be compensated by a Warranty Fund, which is covered by a fixed amount of each insurance premium.
    Since 2013 it is possible to contract an insurance by days as is possible in countries such as Germany and England.[30]
    United Arab Emirates
    When buying car insurance in the United Arab Emirates, the traffic department requires a 13-month insurance certificate each time you register or renew a vehicle registration.
    United Kingdom
    Uninsured cars seized by Merseyside Police on display outside the force’s headquarters in 2006
    In 1930, the UK government introduced a law that required every person who used a vehicle on the road to have at least third-party personal injury insurance. Today, this UK law is defined by the Road Traffic Act 1988,[31] (generally referred to as the RTA 1988 as amended) which was last modified in 1991. The Act requires that motorists either be insured, or have made a specified deposit (£500,000 in 1991) and keeps the sum deposited with the Accountant General of the Supreme Court, against liability for injuries to others (including passengers) and for damage to other persons’ property, resulting from use of a vehicle on a public road or in other public places.
    It is an offence to use a motor vehicle, or allow others to use it without insurance that satisfies the requirements of the Act. This requirement applies while any part of a vehicle (even if a greater part of it is on private land) is on the public highway. No such legislation applies on private land. However, private land to which the public have a reasonable right of access (for example, a supermarket car park during opening hours) is considered to be included within the requirements of the Act.
    Police have the power to seize vehicles that do not appear to have necessary insurance in place. A driver caught driving without insurance for the vehicle he/she is in charge of for the purposes of driving, is liable to be prosecuted by the police and, upon conviction, will receive either a fixed penalty or magistrate’s courts penalty.
    The registration number of the vehicle shown on the insurance policy, along with other relevant information including the effective dates of cover are transmitted electronically to the UK’s Motor Insurance Database (MID) which exists to help reduce incidents of uninsured driving in the territory. The Police are able to spot-check vehicles that pass within range of automated number plate recognition (ANPR) cameras, that can search the MID instantly. It should be noted, however, that proof of insurance lies entirely with the issue of a Certificate of Motor Insurance, or cover note, by an Authorised Insurer which, to be valid, must have been previously ‘delivered’ to the insured person in accordance with the Act, and be printed in black ink on white paper.
    The insurance certificate or cover note issued by the insurance company constitutes the only legal evidence that the policy to which the certificate relates satisfies the requirements of the relevant law applicable in Great Britain, Northern Ireland, the Isle of Man, the Island of Guernsey, the Island of Jersey and the Island of Alderney. The Act states that an authorised person, such as a police officer, may require a driver to produce an insurance certificate for inspection. If the driver cannot show the document immediately on request, and evidence of insurance cannot be found by other means such as the MID, then the Police are empowered to seize the vehicle instantly.
    The immediate impounding of an apparently uninsured vehicle replaces the former method of dealing with insurance spot-checks where drivers were issued with an HORT/1 (so-called because the order was form number 1 issued by the Home Office Road Traffic dept). This ‘ticket’ was an order requiring that within seven days, from midnight of the date of issue, the driver concerned was to take a valid insurance certificate (and usually other driving documents as well) to a police station of the driver’s choice. Failure to produce an insurance certificate was, and still is, an offence. The HORT/1 was commonly known – even by the issuing authorities when dealing with the public – as a «Producer». As these are seldom issued now and the MID relied upon to indicate the presence of insurance or not, it is incumbent upon the insurance industry to accurately and swiftly update the MID with current policy details and insurers that fail to do so can be penalised by their regulating body.
    Vehicles kept in the UK must now be continuously insured unless a Statutory Off Road Notification (SORN) has been formally submitted. This requirement arose following a change in the law in June 2011 when a regulation known as Continuous Insurance Enforcement (CIE) came into force. The effect of this was that in the UK a vehicle that is not declared SORN, must have a valid insurance policy in force whether or not it is kept on public roads and whether or not it is driven.[32]
    Insurer, and Vehicle Excise Duty (VED) / licence data, are shared by the relevant authorities including the Police and this forms an integral part of the mechanism of CIE. All UK registered vehicles, including those that are exempt from VED (for example, Historic Vehicles and cars with low or zero emissions) are subject to the VED taxation application process. Part of this is a check on the vehicle’s insurance. A physical receipt for the payment of VED was issued by way of a paper disc which, prior to 1 October 2014, meant that all motorists in the UK were required to prominently display the tax disc on their vehicle when it was kept or driven on public roads. This helped to ensure that most people had adequate insurance on their vehicles because insurance cover was required to purchase a disc, although the insurance must merely have been valid at the time of purchase and not necessarily for the life of the tax disc.[33] To address the problems that arise where a vehicle’s insurance was subsequently cancelled but the tax disc remained in force and displayed on the vehicle and the vehicle then used without insurance, the CIE regulations are now able to be applied as the Driver & Vehicle Licence Authority (DVLA) and the MID databases are shared in real-time meaning that a taxed but uninsured vehicle is easily detectable by both authorities and Traffic Police. Post 1 October 2014 it is no longer a requirement to display a vehicle excise licence (tax disc) on a vehicle.[34] This has come about because the whole VED process can now be administered electronically and alongside the MID, doing away with the expense, to the UK Government, of issuing paper discs.
    If a vehicle is to be «laid up» for whatever reason, a Statutory Off Road Notification (SORN) must be submitted to the DVLA to declare that the vehicle is off the public roads and will not return to them unless SORN is cancelled by the vehicle’s owner. Once a vehicle has been declared ‘SORN’ then the legal requirement to insure it ceases, although many vehicle owners may desire to maintain cover for loss of or damage to the vehicle while it is off the road. A vehicle that is then to be put back on the road must be subject to a new application for VED and be insured. Part of the VED application requires an electronic check of the MID, in this way the lawful presence of a vehicle on the road for both VED and insurance purposes is reinforced. It follows that the only circumstances in which a vehicle can have no insurance is if it has a valid SORN; was exempted from SORN (as untaxed on or before 31/10/1998 and has had no tax or SORN activity since); is recorded as ‘stolen and not recovered’ by the Police; is between registered keepers; or is scrapped.
    Road Traffic Act Only Insurance differs from Third Party Only Insurance (detailed below) and is not often sold, unless to underpin, for example, a corporate body wishing to self-insure above the requirements of the Act. It provides the very minimum cover to satisfy the requirements of the Act. Road Traffic Act Only Insurance has a limit of £1,000,000 for damage to third party property, while third party only insurance typically has a greater limit for third party property damage.
    Motor insurers in the UK place a limit on the amount that they are liable for in the event of a claim by third parties against a legitimate policy. This can be explained in part by the Great Heck Rail Crash that cost the insurers over £22 million in compensation for the fatalities and damage to property caused by the actions of the insured driver of a motor vehicle that caused the disaster. No limit applies to claims from third parties for death or personal injury, however UK car insurance is now commonly limited to £20m for any claim or series of claims for loss of or damage to third party property caused by or arising out of one incident.
    The minimum level of insurance cover generally available, and which satisfies the requirement of the Act, is called third party only insurance. The level of cover provided by Third party only insurance is basic, but does exceed the requirements of the act. This insurance covers any liability to third parties, but does not cover any other risks.
    More commonly purchased is third party, fire and theft. This covers all third party liabilities and also covers the vehicle owner against the destruction of the vehicle by fire (whether malicious or due to a vehicle fault) and theft of the insured vehicle. It may or may not cover vandalism. This kind of insurance and the two preceding types do not cover damage to the vehicle caused by the driver or other hazards.
    Comprehensive insurance covers all of the above and damage to the vehicle caused by the driver themselves, as well as vandalism and other risks. This is usually the most expensive type of insurance. Interestingly, it is custom in the UK for insurance customers to refer to their Comprehensive Insurance as «Fully Comprehensive» or popularly, «Fully Comp». This is a tautology as the word ‘Comprehensive’ means full.
    Some classes of vehicle ownership, or use, are «Crown Exempt» from the requirement to be covered under the Act including vehicles owned or operated by certain councils and local authorities, national park authorities, education authorities, police authorities, fire authorities, health service bodies, the security services and vehicles used to or from Shipping Salvage purposes. Although exempt from the requirement to insure this provides no immunity against claims being made against them, so an otherwise Crown Exempt authority may chose to insure conventionally, preferring to incur the known expense of insurance premiums rather than accept the open-ended exposure of effectively, self-insuring under Crown Exemption.
    The Motor Insurers’ Bureau (MIB) compensates the victims of road accidents caused by uninsured and untraced motorists. It also operates the MID, which contain details of every insured vehicle in the country and acts as a means to share information between Insurance Companies.
    Soon after the introduction of the Road Traffic Act in 1930, unexpected issues arose when motorists needed to drive a vehicle other than their own in genuine emergency circumstances. Volunteering to move a vehicle, for example, where another motorist had been taken ill or been involved in an accident, could lead to the ‘assisting’ driver being prosecuted for no insurance if the other car’s insurance did not cover use by any driver. To alleviate this situation an extension to UK Car Insurances was introduced allowing a Policyholder to personally drive any other motor car not belonging to him/her and not hired to him/her under a hire purchase or leasing agreement. This extension of cover, known as «Driving Other Cars» (where it is granted) usually applies to the Policyholder only. The cover provided is for Third Party Risks only and there is absolutely no cover for loss of or damage to the vehicle being driven. This aspect of UK motor insurance is the only one that purports to cover the driving of a vehicle, not use.
    On 1 March 2011, the European Court of Justice in Luxembourg ruled that gender could no longer be used by insurers to set car insurance premiums. The new ruling will come into action from December 2012.[35]
    Investigation into repair costs & fraudulent claims
    In September 2012, it was announced that the Competition Commission had launched an investigation into the UK system for credit repairs and credit hire of an alternative vehicle leading to claims from third parties following an accident. Where their client is considered to be not at fault, Accident Management Companies will take over the running of their client’s claim and arrange everything for them, usually on a ‘No Win — No Fee’ basis. It was shown that the insurers of the at-fault vehicle, were unable to intervene in order to have control over the costs that were applied to the claim by means of repairs, storage, vehicle hire, referral fees and personal injury. The subsequent cost of some items submitted for consideration has been a cause for concern over recent years as this has caused an increase in the premium costs, contrary to the general duty of all involved to mitigate the cost of claims. Also, the recent craze of «Cash for crash» has substantially raised the cost of policies. This is where two parties arrange a collision between their vehicles and one driver making excessive claims for damage and non existent injuries to themselves and the passengers that they had arranged to be «in the vehicle» at the time of the collision. Another recent development has seen crashes being caused deliberately by a driver «slamming» on their brakes so that the driver behind hits them, this is usually carried out at roundabout junctions, when the following driver is looking to the right for oncoming traffic and does not notice that the vehicle in front has suddenly stopped for no reason. The ‘staging’ of a motor collision on the Public Highway for the purpose of attempting an insurance fraud is considered by the Courts to be organised crime and upon conviction is dealt with as such.
    United States
    Main article: Vehicle insurance in the United States
    The regulations for vehicle insurance differ with each of the 50 US states and other territories, with each U.S. state having its own mandatory minimum coverage requirements (see separate main article). Each of the 50 U.S. states and the District of Columbia requires drivers to have insurance coverage for both bodily injury and property damage, but the minimum amount of coverage required by law varies by state. For example, minimum bodily injury liability coverage requirements range from $30,000 in Arizona[36] to $100,000 in Alaska and Maine,[37] while minimum property damage liability requirements range from $5,000 to $25,000 in most states.
    Coverage levels
    Vehicle insurance can cover some or all of the following items:
    The insured party (medical payments)
    Property damage caused by the insured
    The insured vehicle (physical damage)
    Third parties (car and people, property damage and bodily injury)
    Third party, fire and theft
    In some jurisdictions coverage for injuries to persons riding in the insured vehicle is available without regard to fault in the auto accident (No Fault Auto Insurance)
    The cost to rent a vehicle if yours is damaged.
    The cost to tow your vehicle to a repair facility.
    Accidents involving uninsured motorists.
    Different policies specify the circumstances under which each item is covered. For example, a vehicle can be insured against theft, fire damage, or accident damage independently.
    If a vehicle is declared a total loss and the vehicle’s market value is less than the amount that is still owed to the bank that is financing the vehicle, GAP insurance may cover the difference. Not all auto insurance policies include GAP insurance. GAP insurance is often offered by the finance company at time the vehicle is purchased.
    Excess
    An excess payment, also known as a deductible, is a fixed contribution that must be paid each time a car is repaired with the charges billed to an automotive insurance policy. Normally this payment is made directly to the accident repair «garage» (the term «garage» refers to an establishment where vehicles are serviced and repaired) when the owner collects the car. If one’s car is declared to be a «write off» (or «totaled»), then the insurance company will deduct the excess agreed on the policy from the settlement payment it makes to the owner.
    If the accident was the other driver’s fault, and this fault is accepted by the third party’s insurer, then the vehicle owner may be able to reclaim the excess payment from the other person’s insurance company.
    The excess itself can also be protected by a motor excess insurance policy.[citation needed]
    Compulsory excess
    A compulsory excess is the minimum excess payment the insurer will accept on the insurance policy. Minimum excesses vary according to the personal details, driving record and the insurance company. For example, young or inexperienced drivers and types of incident can incur additional compulsory excess charges.
    Voluntary excess
    To reduce the insurance premium, the insured party may offer to pay a higher excess (deductible) than the compulsory excess demanded by the insurance company. The voluntary excess is the extra amount, over and above the compulsory excess, that is agreed to be paid in the event of a claim on the policy. As a bigger excess reduces the financial risk carried by the insurer, the insurer is able to offer a significantly lower premium.
    Basis of premium charges
    Main article: auto insurance risk selection
    Depending on the jurisdiction, the insurance premium can be either mandated by the government or determined by the insurance company, in accordance with a framework of regulations set by the government. Often, the insurer will have more freedom to set the price on physical damage coverages than on mandatory liability coverages.
    When the premium is not mandated by the government, it is usually derived from the calculations of an actuary, based on statistical data. The premium can vary depending on many factors that are believed to affect the expected cost of future claims.[38] Those factors can include the car characteristics, the coverage selected (deductible, limit, covered perils), the profile of the driver (age, gender, driving history) and the usage of the car (commute to work or not, predicted annual distance driven).[39]
    Neighbourhood
    The address of the owner can affect the premiums. Areas with high crime rates generally lead to higher costs of insurance. [40][41]
    Gender
    Because male drivers, especially younger ones, are on average often regarded as tending to be more aggressive, the premiums charged for policies on vehicles whose primary driver is male are often higher. This discrimination may be dropped if the driver is past a certain age.[citation needed]
    On 1 March 2011, the European Court of Justice decided insurance companies who used gender as a risk factor when calculating insurance premiums were breaching EU equality laws.[42] The Court ruled that car-insurance companies were discriminating against men.[42] However, in some places, such as the UK, companies have used the standard practice of discrimination based on profession to still use gender as a factor, albeit indirectly. Professions which are more typically practised by men are deemed as being more risky even if they had not been prior to the Court’s ruling while the converse is applied to professions predominant among women.[43] Another effect of the ruling has been that, while the premiums for men have been lowered, they have been raised for women. This equalisation effect has also been seen in other types of insurance for individuals, such as life insurance.[44]
    Age
    Teenage drivers who have no driving record will have higher car insurance premiums. However, young drivers are often offered discounts if they undertake further driver training on recognized courses, such as the Pass Plus scheme in the UK. In the US many insurers offer a good-grade discount to students with a good academic record and resident-student discounts to those who live away from home. Generally insurance premiums tend to become lower at the age of 25. Some insurance companies offer «stand alone» car insurance policies specifically for teenagers with lower premiums. By placing restrictions on teenagers’ driving (forbidding driving after dark, or giving rides to other teens, for example), these companies effectively reduce their risk.[45]
    Senior drivers are often eligible for retirement discounts, reflecting the lower average miles driven by this age group. However, rates may increase for senior drivers after age 65, due to increased risk associated with much older drivers. Typically, the increased risk for drivers over 65 years of age is associated with slower reflexes, reaction times, and being more injury-prone.[citation needed]
    U.S. driving history
    In most U.S. states, moving violations, including running red lights and speeding, assess points on a driver’s driving record. Since more points indicate an increased risk of future violations, insurance companies periodically review drivers’ records, and may raise premiums accordingly. Rating practices, such as debit for a poor driving history, are not dictated by law. Many insurers allow one moving violation every three to five years before increasing premiums. Accidents affect insurance premiums similarly. Depending on the severity of the accident and the number of points assessed, rates can increase by as much as twenty to thirty percent.[46] Any motoring convictions should be disclosed to insurers, as the driver is assessed by risk from prior experiences while driving on the road.
    Marital status