Comment: How pay-as-you-go insurance is helping drivers amid soaring fuel prices

By Sten Saar, chief executive officer at Zego

The ongoing cost-of-living crisis is forcing individuals that use their vehicles for work and fleet managers to make difficult financial decisions. The reality of the situation is that many drivers and businesses are choosing not to undertake jobs purely because of inflated fuel prices. In other words, fuel prices are so high that some jobs simply aren’t cost-effective anymore.

For example, research recently carried out by the consumer site MoneySuperMarket found that van drivers are now paying on average £2,427 more annually to fuel their vehicles. This figure is inevitably higher for entire fleets too. With the cost-of-living crisis impacting every aspect of people’s finances, saving money has never been more important for individuals and businesses. After fuel and maintenance, insurance is one of the biggest expenses for vehicle-based work -–yet this is where behavioural-based insurance can be a useful tool for reducing costs.

Behaviour-based, data-led insurance is Zego’s key proposition. The risk reductions provided by telematics-based insurance mean that steps can be taken to reduce fleets’ business costs as they grapple with rising pump prices and wider business costs. In addition, fleets that exhibit safer driving behaviours can reduce their premium at renewal. All in all, there’s less risk on our roads, meaning a much safer environment for road users. This creates a mutually beneficial situation for all concerned.

These digital solutions are primarily used for mitigating risk, allowing fleet managers to monitor the fleet’s driving behaviour. When certain drivers exhibit dangerous driving behaviours, managers can initiate conversations and highlight specific areas where improvements can be made. Some technology is already so advanced that it shows how individuals are driving, accelerating, braking and cornering, and how the impact of these behaviours is damaging vehicles. Once individual drivers act on the feedback they’ve been given, improved driving behaviours result in less wear and tear and fewer accidents that can lead to additional, and often costly, maintenance work on fleet vehicles.

In recent years, we’ve seen a number of fleet businesses transition to electric vehicles. This is costly in itself and can be prohibitive for smaller fleets already struggling with rising operating costs. If companies cannot afford to electrify their fleets, then there’s only so much they can do to future-proof their businesses from fuel price shocks down the line. However, adopting behaviour-based insurance can provide some respite in the form of fairer, more accurately priced premiums.

The wider macroeconomic situation is a source of immense concern for all of us. Record-high inflation, soaring fuel prices and the general cost-of-living squeeze is affecting individuals and businesses of all sizes. In the past, insurance was an industry that might have benefited from such uncertainty. Traditionally opaque insurance policies based on broad-brush assumptions (such as age, postcode and so on) will see consumers pay over the odds at the worst time possible.

Flexible, usage-based policies proved their worth during the Covid-19 pandemic; for example, fleets, couriers and private hire drivers who were unable to work regular shifts during the various lockdowns only paid for insurance whilst using their vehicles for work. If they had a traditional annual policy, they would have been stuck paying for their vehicle to sit idle, pushing up their outgoings unnecessarily.

The prevailing sense of uncertainty over the UK’s energy security means that future price shocks will be a matter of when, not if. Adopting behaviour-based insurance won’t undo the hardship inflicted by the current economic situation. However, if taking on such policies gives businesses and consumers greater control and transparency over their spending, then it will go some way to help them navigate increasingly uncertain times.