Understanding Pay-How-You-Drive Insurance in the Philippines

Insurance as a subject should not be taken lightly, as a financial tool it offers the needed protection to a car owner. Talking specifically about the Philippines, here a driver must have CTPL, i.e., Compulsory Third-Party Liability insurance. It offers financial protection to the car owner against any possible liability for a third-party-caused injury and/or death in an accident involving the insured vehicle.

Wanna know more about CTPL? Here check this link

But just having CTPL is not enough. It might be mandatory but a car owner needs more financial protection in case of an accident and against other uncertain events like theft, vandalism, natural disaster, fire, etc. Enters the scene, comprehensive insurance. We suggest every owner get it as it offers them and their car the following coverage -

• Acts of God (including earthquakes and typhoons)
• Fire and explosion
• Car theft and burglary
• Liabilities caused by accidental collision and overturning
• Third-party liability or damage to other people's property, including cars, buildings, and others
• Legal liabilities for third parties in case of death or bodily injury
• Riots, strikes, and other malicious acts by third parties
• Damage to the policyholder’s car

Also Read: Why comprehensive insurance is vital for car owners in the Philippines

What’s new?

Pay-How-You-Drive (PHYD) insurance, also known as usage-based insurance (UBI), is transforming the landscape of car insurance in the Philippines. With the growing adoption of telematic technology, It is emerging as an attractive option for Filipino drivers. And today we’ll be discussing this innovative insurance model in detail.

What is Pay-how-you-drive insurance? Pay-how-you-drive is a smart insurance model that rewards drivers for safe and responsible driving habits by tailoring premiums to individual behavior behind the wheel.

 

Understanding Pay-How-You-Drive (PHYD) insurance

Pay-how-you-drive insurance is a modern approach to car insurance that calculates premiums based on a driver’s behavior rather than static factors like age, gender, or vehicle type. Insurers through mobile apps and/or telematic devices monitor the policyholders driving habits like speed, braking, acceleration, and time when the car is being used. This data is then analyzed to assess the driver’s risk profile which then leads to the insurer deciding the premium accordingly.

 

 

How does PHYD insurance work?

As mentioned PHYD insurance depends on the data about the policyholder’s driving habits. Therefore, it becomes crucial for the insurer to have the most accurate information which will then be analyzed and ultimately lead to the calculation of the premium amount. The pointer below will help you understand the process better.

Step 1 Telematics installation

To be able to access Pay-How-You-Drive insurance, policyholders are required to have a telematics device installed in their car or download a companion mobile app. Why? Well, that’s because this device or app gathers real-time data on several driving parameters.

Step 2 Data collection

The telematic system or mobile app records key aspects of the policyholder’s driving behavior including -

• Speed and acceleration patterns
• Frequency and intensity of braking
• Adherence to traffic rules
• Travel times and distances

Step 3 Data analysis

The collected data is then analysed by insurers to determine how safely and responsibly the car is driven. Drivers with consistent safe driving patterns are rewarded with lower premiums.

Step 4 Premium adjustment

Based on the analyzed data, the insurance provider calculates the policyholder’s premium, which is lower for safe drivers or higher for risky behaviors.

Benefits of Pay-How-You-Drive Insurance

When it comes to Pay-How-You-Drive insurance, though it is a relatively new concept for the Philippines market, in this short span several advantages have popped up; all of which we’ll be discussing below.

Cost-saving option, safe drivers

The primary advantage of PHYD insurance is financial savings for drivers who practice road safety. Those with good driving habits can enjoy reduced premiums over time.

Encourages safe driving practice

Knowing that their driving habits are being monitored, drivers are more likely to adopt cautious and responsible behaviors, contributing to road safety. A win-win situation for the policyholder, insurer, and government.

Fairer premium calculation

Traditional car insurance often relies on generalized assumptions about risk. PHYD insurance, on the other hand, personalizes premiums based on individual performance, making it fairer.

Transparency and accountability

Drivers gain insights into their driving habits through telematics reports, fostering a greater understanding of their strengths and areas for improvement.

Environmental benefits

By encouraging smoother driving and reducing unnecessary trips, PHYD insurance can lower fuel consumption and vehicle emissions.

Major challenges with Pay-How-You-Drive insurance

While the PHYD insurance bags a lot of benefits, its adoption is not that easy and comes with its fair share of challenges including -

High initial cost

One of the major challenges with the adoption of PHYD, both by insurers and drivers, is the high installation cost of telematics devices. Not to forget the associated operational costs.

Data privacy cost

The entire base of PHYD stands on the collection and analysis of driving-related data of the policyholder. This often raises questions about how securely this information is stored and used.

Limited awareness

As PHYD is fairly new and not that spoken about, many Filipinos remain unaware of its availability and benefits, thus limiting its penetration in the market.

Inconsistent road conditions

The poor and inconsistent road conditions and the unpredictable road conditions of the country are pretty evident. This often leads to inaccurate assessment of the policyholder’s driving behavior.

Weak telecommunication infrastructure

Since PHYD insurance relies on consistent data transmission, areas with weak or unreliable internet connectivity may face difficulties.

Things to consider when choosing PHYD insurance

At the moment, PHYD insurance is not that widespread with just one insurance provider and automaker partnership offering the coverage. However, we expect that in the future more insurance providers will offer PHYD and then a policyholder will have options to compare and choose the one best suited for him/her. So, for future use, here are some factors one should consider while selecting a PHYD insurance policy.

Coverage options

Ensure that the policy you pick includes comprehensive coverage for potential risks, such as theft, accidents, and natural disasters.

Reputation of the provider

It is important to associate with reputed and reliable insurers. For that research customer reviews and the reputation of the insurance company to gauge reliability and quality of service.

Telematics technology

Always opt for a provider with user-friendly telematics systems or apps that deliver clear and accessible driving insights. This will make the claim process seamless.

Premium flexibility

Check how often premiums are adjusted and whether safe driving habits lead to significant cost reductions or not.

Data privacy

We all know the importance of data, so when deciding on a PHYD insurer confirm that the company adheres to strict data protection standards and will not misuse your information.

Pay-How-You-Drive Insurance in the Philippines

Do we need PHYD? Is it the need of the hour?

The answer is YES. Given the increasing number of vehicles on the roads and the growing awareness of road safety, the introduction of PHYD seems right. According to the Philippine Statistics Authority, vehicle registrations have been steadily rising, which emphasizes the need for innovative insurance models that promote responsible driving.

Further, the government's endless efforts to improve infrastructure and implement traffic regulation align very well with the core objective of PHYD insurance, i.e., to promote road safety.

Not to forget, PHYD also contributes towards the sustainability goals by encouraging eco-friendly driving practices. By adopting smooth and steady driving a driver can reduce fuel consumption and minimizes wear and tear on the vehicle and it indirectly cuts down greenhouse gas emissions.

AXA Philippines and Toyota Partnership

In June 2023, AXA Philippines and Toyota Motor Philippines launched a PHYD insurance product tailored for the Philippine market. Know as Connected Toyota Insure, it uses advanced telematics that track driving habits to calculate premiums.

This partnership makes AXA the first provider in the Philippines to offer a PHYD product. Further, this initiative aligns with the growing trend of integrating smart technology into insurance services. For instance, the Emma by AXA PH app or MyToyota app provides insights to drivers to improve their driving behavior and potentially reduce insurance costs over time.

Key features of PHYD coverage by AXA & Toyota -

• Customizable premiums based on driving behavior
• Coverage for accidents, theft, and property damage
• Added services like vehicle repairs and towing assistance
• Coverage against third-party liability
• Coverage for passengers
• Full-service coverage

Steps to get PHYD insurance in the Philippines

Follow these steps to acquire PHYD insurance in the Philippines -

Step 1 Research and Contact the provider

Look for insurers in the Philippines offering PHYD policies. For now, AXA Philippines, in partnership with Toyota, is the only PHYD insurance source in the country. It has launched a telematics-based PHYD coverage. Do not forget to check the ongoing offerings, terms, and benefits.

Step 2 Understanding policy features

Review the inclusions and exclusions of the PHYD policy. Typically, coverage includes damage due to accidents, theft, and natural disasters, while exclusions often pertain to reckless or uninsured driving.

Step 3 Telematics installation

Once you opt for a PHYD plan, the insurer may require telematics installation in your car. Follow the provider’s instructions for app setup or device placement.

Step 4 Provide accurate information

Submit required details, such as car registration and personal data, during the application. Transparency ensures smooth onboarding and avoids claim disputes.

Step 5 Drive safety

Maintain safe driving habits, as your behavior directly impacts your premium. Avoid sudden accelerations, harsh braking, and late-night driving to minimize risk assessments.

Step 6 Monitor reports

Regularly review your driving reports provided by the insurer. This allows you to adjust your habits to maximize savings.

Step 7 Review premium adjustments

It is a good idea to periodically check how your premiums are calculated. Communicate with your insurer if discrepancies arise in your driving data or associated charges.

Bottom line

Pay-How-You-Drive insurance is a pretty-promising innovation. It combines technology and behavior-based incentives, which puts a fairer and more efficient system in place. While still in its early stages in the Philippines, initiatives like AXA and Toyota’s partnership showcase its potential to improve road safety and provide significant cost savings for responsible drivers.

Also Read: 8 Must-ask questions before buying car insurance