RAC unveils pay-as-you-drive car insurance deal to cut motorists' costs

The RAC offers a subscription service for car insurance that could shake up the market and cut costs for motorists.

Drivers who travel fewer kilometers, possibly due to the Covid-19 pandemic, can potentially save money with the “No Tie” plan.

Instead of being tied to an annual contract, they pay a monthly subscription, and the fees also depend on the actual number of kilometers driven. The product is aimed at people who drive less than 6,000 miles per year.

RAC Car Insurance’s Pay by Mile charges drivers an agreed mile per mile for the miles in addition to a set monthly fee that covers when the car is parked. There is also an initial one-time activation fee of £ 50 for full coverage.

Mark Godfrey, managing director of RAC Insurance, said motorists would not be bound by an annual contract and could leave without notice if they find a better deal elsewhere.

He said: “Auto insurance is a market that has been ripe for a change for some time, so we are excited to introduce a truly groundbreaking new product that is ideal for drivers who do not travel as many miles. “

“With standard car insurance, drivers are expected to estimate right from the start how many kilometers they will likely drive, regardless of whether or not they will cover that distance during the insurance year. For people who do not drive very regularly or who only drive short distances, this can result in a premium that seems too expensive.

“Pay by Mile from RAC Car Insurance offers something different. After paying a one-time activation fee of £ 50 and a small monthly sum that covers the vehicle for the entire parking time, drivers pay a unique price per mile of just 4p for every mile they actually drive.

“In this way, drivers save money when they cannot or cannot drive.”

The guidelines are signed by Highway Insurance Company Limited, part of LV =, and the RAC has also partnered with technology company Wrisk.

Customers need to put a “drive label” on their windshield, pair it with their smartphone and their miles will be recorded. The insurance policy has a deductible of at least £ 250.

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