pay as you drive (PAYD)

Usage-based insurance (UBI) is an insurance strategy that is based on the policyholder's usage behavior. This strategy is applied in motor insurance policies that are calculated according to driving style and kilometers driven, in Pay as you Drive (PAYD) or Pay how you Drive (PHYD).

Pay as you Drive (PAYD) is a flexible insurance concept in which insurance fees are based on the type of car driven, its horsepower rating, and the driver's driving experience, but also on the miles driven and the way the car is driven. The last two points differ from traditional car insurance and are transmitted from the vehicle to the insurance company while driving. The determination of the driving distance can be transmitted via the GPS system and permanently installed GSM module, the acceleration and braking processes and their intensity via the on- board networks.

Which algorithm is used for the insurance charges is up to the insurance company. Usage-based insurance is already offered as a PAYD service by various telecommunications companies.

The PAYD concept is also viewed critically, as the insurance companies can also filter out customer-specific data from the transmitted data. For example, daytime and nighttime driving, speeding, making phone calls while driving, and much more.