Car insurance per kilometer: how does it work? What are its advantages?
One of the main limitations why around the 70% of the owners of a vehicle in Mexico do not have it protected by insurance, According to data from the National Commission for the Protection and Defense of Users of Financial Services (Condusef), is the issue of cost.
The newer it is, the more accessories it has or the more coverage it includes, the price rises and, although the cost is calculated based on statistical data, in many cases, the price of insurance can be exorbitant.
One option is to take out basic civil liability insurance, with which you protect yourself in the event of causing harm to a third party. However, this insurance does not cover the risks that your car may suffer and that is why it is not entirely convenient.
How about an insurance that only works when your car starts up, that is easy to hire, that you can pay monthly with your credit card and that even integrates you into a program of rewards for being a good driver? This alternative is the one contemplated by car insurance per kilometer.
In GUROS We want to show you what this modality consists of, as well as all the available options that are in the market so that your choice is easier.
How does car insurance per kilometer work?
Per kilometer car insurance basically offers transparency. Most have traditional auto insurance coverage. That is, most of the coverages are similar to those of any traditional auto insurance.
This implies that the majority of car insurance per kilometer will offer the coverage of:
(material damage, total theft, civil liability, medical expenses of the occupants and accidents to the driver) road and legal assistance, replacement car, coverage in the US and Canada, even until you have forgotten your keys inside the car.
In most options, the insurance per kilometer works exactly the same for the coverage of Civil Liability (damage to third parties) and Total Theft.
However, the main difference is in the way the vehicle's property damage coverage is priced. In traditional insurance, a fixed sum is charged per year, which is calculated with an estimate of what that specific driver for the vehicle in question will circulate. This calculation is made by the actuaries of each insurer based on their claims experience.
In the case of car insurance per kilometer, material damage coverage is charged for each kilometer traveled. In other words, the cost of that fixed sum is divided by the kilometers that each user actually travels. In other words: instead of charging each customer an estimate of the kilometers they will travel, it charges them for the kilometers that they actually traveled.
How do you measure the number of kilometers a vehicle travels each month?
To measure the number of kilometers you travel per month, there are normally two options:
1. Connect a device to your car's computer to extract the distance. The advantage of this system is that you can immediately notify insurers in the event of an accident. In addition, we avoid «human error» when activating it (in case we forget).
2. Use your cell phone to count the kilometers. In some cases, each customer will have to turn the property damage coverage on and off when starting a trip (that is, it does not activate automatically).
In both cases, the rate we will charge should be lower than traditional insurance … or not?
For whom is it advisable to take out car insurance per kilometer?
Particularly this variety of car insurance per kilometer seems to have significant business potential because almost three-quarters of the vehicle fleet in Mexico does not have insurance. So putting a substantially cheaper option on the market without significantly reducing coverage can be enormously attractive.
However, and although it can be hired by anyone, there are some characteristics that make it ideal for certain people. This is the case of millennials, for example, a generation that increasingly uses mobility solutions “on demand” such as Uber, eConduce, Lime, Carengo, and other similar solutions.
The car insurance per kilometer is especially recommended in those cases in which:
- The insured car is for private use. This is due to the fact that vehicles for public use travel a much greater number of kilometers, so this type of insurance would end up being more expensive than the traditional one.
- The employer's work and home are at a relatively close distance (less than 5 kilometers, ideally). People who generally meet this requirement have an interesting income level for insurers.
Due to the conditions of this group of people (upper-middle class, with mastery of technology, good income level, intermediate-superior educational level), regularly the cars are in good mechanical condition, with periodic maintenance and have a safe parking place
What insurers offer car insurance per kilometer?
In Mexico there are three companies that sell this type of insurance:
- Miitou , whose policies are supported by Atlas Insurance
- Kimmo , which offers insurance supported by HDI Seguros and
- SXKM, whose policies are backed by the company AIG Insurance
You must bear in mind that this type of insurance is for drivers who travel between 13 thousand and 15 thousand kilometers a year. This is at the very suggestion of two of the three insurers that offer the service (Miitou and Kimmo), because, otherwise, the cost of the policy could skyrocket.
Even the third alternative (SXKM) suggests a maximum of 7 thousand km per year. In this alternative, packages ranging from 250 km to 7 thousand kilometers per year valid from 1 to 12 months, with the exception that they are non-transferable and each package has a limit already either by validity or by distance traveled.
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How long has car insurance been on the market per kilometer?
These auto insurance alternatives are recent. Kimmo began operations in April of 2017, while Miituo emerged in September of that year and SXMN (from AIG) was born at the beginning of 400.
Main advantages of car insurance per kilometer
Main disadvantages of auto insurance for kilometer
- The cost is affordable for cars with short distances. In case of exceeding the contracted mileage, the cost rises
- The service is provided through a third party, so it could generate bureaucratic complications in the event of a claim
- The amount of insurers that offer this product in Mexico is still limited and its quality depends on the insurer that supports the service
- Access to specific additional coverages or the possibility of «personalizing your insurance» is limited
- Every time you get into your car you must access the mobile application that calculates the distance you traveled and determine the amount you have to pay
- Not all insurers in the market have the option to receive payments cash
Car insurance per kilometer … is it the future solution?
Of the three companies that offer car insurance per kilometer, SXKM is the one that has the most added values in its product, especially with the device that measures the mileage you travel. Its name is On-Board Intelligent Platform (PIA), which, with the information it collects, around 160 data from the car's computer, issues recommendations to reduce risk at the wheel.
In addition, if you are a good driver, its rewards program gives you benefits such as zero deductible in case of theft or material damage and you can climb to a value level until you become a legend driver Grand Prix to which coverage, trips, discounts or vacations are given away.
The main challenge facing this type of auto insurance is that users must be willing to change the way they manage their insurance. If it is currently difficult for the majority of the population to purchase traditional car insurance, let's imagine now the need to learn how to use the application or install the device to count the kilometers.
It is say that in theory it is a more «fair» solution in terms of price, but there are still years of technology development and market evolution before it can replace traditional auto insurance.
How is car insurance canceled per kilometer?
The cancellation procedure is very simple, in case you are not satisfied with your insurance, all you have to do is contact the company that offers you the service and proceed with the procedure cancellation, which has no cost, except in the case of SXMX, in which you have to return the device that is granted as a loan to calculate the mileage, otherwise, an extra charge of $ 200 pesos.
In GUROS you can obtain in 3 simple steps the best cost to insure your vehicle, with a few general information, without filling out cumbersome forms.
Click here and get a discount car insurance quote.
Are you interested in knowing more? We recommend you click on one of the following articles:
- How the mandatory civil liability insurance works
- Vehicle verification in DF, State of Mexico and Puebla
15 car insurance terms you need to know