Cuvva, the pay as you go car insurer, is to launch a brand-new category of car insurance aimed at car owners who use their cars infrequently.
Currently low-mileage drivers have to pay hefty premiums through which they effectively subsidise high mileage drivers. Cuvva is launching a groundbreaking way of buying car insurance that hopes toÂ revolutionise the sector and could save drivers up to 70 per cent of the cost of an annual premium – often saving drivers between Â£500 and Â£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. Many 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 way by paying a monthly subscription of between Â£10 and Â£30, depending on the car and where they live. Drivers will then pay a top-up premium from Â£1.20 an hour, via an app when they want to drive the car, putting them in control of the cost in a unique way. As 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 radically cut the cost of insurance for people with shorter driving histories.
Cuvvaâ€™s payment model is hopingÂ to revolutionise the car insurance world, bringing to it the speed and convenience that has dramatically transformed 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, 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:
â€œIt was ridiculous that I couldnâ€™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 couldnâ€™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 Â£500 to Â£1,000 a year on your car insurance is life-changing. Everyone can think of someone who will benefit from that.â€
â€œTechnology 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 donâ€™t drive much, many people get an unfair deal when it comes to car insurance.â€
Ophelia Brown, general partner at venture capital investor LocalGlobe, said:
â€œPay-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. Itâ€™s crazy that peopleâ€™s premiums havenâ€™t and canâ€™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.”
The start-up claims to beÂ the first Â tech platform to offer cover through a mobile app to drivers who want to borrow a friend or relativeâ€™s car for a few hours or share driving, when it launched in October 2015. 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 can offer very low cost insurance to customers because it has built a tech platform that sits 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 worldâ€™s biggest re-insurers.
The company has raised Â£2million in funding since it was started and recently completed a Â£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 companyâ€™s backers.
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