Category: Telematics · Reviewed by Al Jabbar, Broker · Specialist Risks · Last reviewed 2026-06-10
Pay-as-you-drive (PAYD) is a form of motor insurance in which the variable element of the premium is calculated by reference to verified mileage, typically captured by a fitted telematics device, OBD-II dongle or smartphone application, with the policyholder billed periodically for miles driven on top of a fixed annual or monthly standing charge.
Category: Telematics Aliases: PAYD, mileage-based motor insurance, metered motor insurance, pay-per-mile insurance Established: First marketed in the UK by Norwich Union from 2006; modern app-led re-entry from c. 2018 (By Miles) Related: Telematics insurance / UBI, Pay-how-you-drive, By Miles, Cuvva, Motor insurance
PAYD products price motor insurance principally on exposure — kilometres or miles travelled — rather than on driving style. A typical UK PAYD policy has two components: an annual or monthly fixed charge covering vehicle-when-parked risks (fire, theft, malicious damage, escape of liquid, certain third-party risks not contingent on use) and a variable per-mile charge for in-use risks. The policy remains a single contract of insurance issued in compliance with the Road Traffic Act 1988; the metered structure is an internal premium-calculation mechanism, not a partition of cover.
PAYD is conceptually distinct from pay-how-you-drive, which prices on behaviour. The two are often combined; many UK telematics propositions are hybrid PAYD-PHYD products.
The compulsory third-party limb of cover, mandated by sections 143 and 145 of the Road Traffic Act 1988, must be effective whenever the vehicle is used on a road or other public place — including miles not yet billed. PAYD insurers therefore retain liability to the Motor Insurers’ Bureau and to third parties regardless of whether mileage has been paid for; metering is a billing rather than coverage construct.
Conduct-of-business rules apply in the ordinary way: ICOBS 6 on product information, ICOBS 7 on policy servicing, ICOBS 8 on claims, PROD 4 on product oversight and PRIN on the Principles for Businesses. Renewal pricing must comply with the General Insurance Pricing Practices remedy in FCA PS21/5 (May 2021): a renewing customer should not pay more than an equivalent new customer through the same channel. The Consumer Duty in PS22/9 (July 2022) requires the per-mile structure to be intelligible to the average customer in the target market — relevant where a low-mileage budget is exceeded by an unplanned long journey.
Data collection is governed by the Data Protection Act 2018 and the UK GDPR, and is the focus of the telematics privacy regulation and GDPR telematics entries.
A PAYD insurer installs a device, requires an OBD-II dongle, or pairs a smartphone app to record cumulative odometer or GPS-derived mileage. The customer is quoted an annual fixed price and a per-mile rate (commonly 3–9p per mile in 2024–2026 market quotations). The platform issues a monthly statement; payment is taken by direct debit. In the event of a claim, the insurer reconciles the device’s recorded miles against the vehicle’s MOT odometer history (DVSA Check vehicle MOT history service) as part of normal claims investigation.
Mileage that is not recorded — for example, where the device is unplugged or the app is uninstalled — typically triggers contractual remedies: a “default mileage” charge, suspension of the metered discount, or, in repeated cases, cancellation under the policy’s misrepresentation or non-co-operation clauses.
By Miles, launched in 2018, popularised the modern monthly-billed PAYD format in the UK. Cuvva and Tempcover sell short-duration cover (hour, day, week) — a closely related model in which the unit of exposure is time rather than distance. Aviva and Direct Line have offered metered or low-mileage variants. Fleet PAYD is rare; commercial fleet products typically combine flat-rate cover with behavioural reporting (see telematics for fleet).
A retiree’s car is used for c. 3,000 miles per year. Conventional motor cover quotes £540. A PAYD insurer offers £190 fixed plus 5p per mile. Over the year the customer drives 3,140 miles, paying £190 + £157 = £347. The platform sends monthly statements; a long holiday trip in August is forecast in advance through the app.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-10. Next review: 2026-12-10.
Apex Insurance Brokers Limited. Authorised and regulated by the Financial Conduct Authority, FRN 724952. Registered in England and Wales, Companies House 07014570. This entry provides general information about UK insurance concepts and is not regulated advice. Consult your insurance broker on your specific position.
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