Cuvva, the pay as you go car insurer, is poised to launch a brand-new category of car insurance aimed at car owners who use their cars infrequently.
As of now, low-mileage drivers have to pay substantial premiums through which they effectively subsidize high mileage drivers. Cuvva is launching a groundbreaking way of buying car insurance that will revolutionize the sector and could save drivers up to 70 percent of the cost of an annual premium – potentially saving drivers between £500 and £1500 a year.
According to Department for Transport and DVLA figures, there are around six million cars in the UK that are driven very infrequently. A lot of these belong to young city dwellers who pay high insurance premiums for cars that are driven for fewer than 4,000 miles a year.
Cuvva will allow car owners to buy insurance in a new and innovative way by paying a monthly subscription of between £10 and £30, on the basis of the car and where they live. Then, drivers will pay a top-up premium from £1.20 an hour, via an app when they want to drive the car, which will hand them the steering wheel in a unique, almost literal way. Like with conventional insurance, drivers who use the monthly subscription product will earn a no claims discount each year, which will be especially important in helping to significantly cut the cost of insurance for people with shorter driving histories.
Cuvva’s payment model has the potential to revolutionize the car insurance world, elevating it to the speed and convenience that has monumentally had a hand in transforming the way consumers use taxis and order take-away food. The product is aimed largely at car owners who live in cities and rely on public transport for their journey to work, meaning that their car is driven for fewer than 4,000 miles a year.
Started in February 2014, Cuvva is set to cut premiums dramatically for low-mileage users. Founder Freddy Macnamara came up with the idea of paying for car insurance by the hour while discussing lending his car to a friend. He said:
It was ridiculous that I couldn’t borrow a car for an hour, because of the difficulty of getting short-term cover. I could order an Uber or a Deliveroo to my house, but I couldn’t buy insurance for a short period quickly. We realised that we could use the same mechanism to save infrequent drivers a huge amount of money. Saving £500 to £1,000 a year on your car insurance is life-changing. Everyone can think of someone who will benefit from that.
He continued,
Technology has changed so many industries and given consumers cheaper, more convenient alternatives. Yet car insurance continues to be opaque and inflexible, costing some people a lot more than it should. Whether it is borrowing a car from a friend for a short period of time, or owning a car that you don’t drive much, many people get an unfair deal when it comes to car insurance.
Ophelia Brown, the general partner at venture capital investor LocalGlobe, said:
Pay-as-you-go insurance is a long overdue product in the UK, where increasingly the trend is for drivers to use their cars less and less. It’s crazy that people’s premiums haven’t and can’t change to reflect that. Cuvva understands that, just as consumers expect price transparency and flexibility with all other financial services, they should also get that with their insurance.
Since its launch in October 2015, the startup became the first ever tech platform to offer cover through a mobile app to drivers who want to borrow a friend or relative’s car for a few hours or share driving. Cuvva has now sold over 130,000 hours of car insurance through its Cuvva Sharing product to drivers who want to borrow a car for as little as an hour.
Cuvva is able to offer very low-cost insurance to customers because it has built a tech platform that acts as a layer between underwriters and customers, with direct links to third parties like the DVLA. This allows the insurtech company to cut out the middle-men and build products that are customer-centric and flexible.
The company is regulated by the Financial Conduct Authority and re-insured by Swiss Re, one of the world’s biggest re-insurers.
The company recently completed a £1.5 million funding round, led by venture capital investors LocalGlobe. Tekton Ventures, Techstars Ventures, Seedcamp, Nick Hungerford (the founder of online investment management service Nutmeg) and Ian Hogarth (founder of SongKick) are also among the company’s backers.
