Pay How You Drive (PHYD) is a form of Usage-Based Insurance (UBI) in which motor insurance premiums are influenced by driving behavior rather than solely by static rating factors or overall mileage.
While traditional motor insurance pricing relies heavily on demographic variables and historical claims data, PHYD introduces measurable behavior-based risk indicators into underwriting. The underlying principle is straightforward: safer driving behavior is associated with lower claims frequency and should be reflected in pricing logic.
PHYD focuses on driving quality. It answers the question: how safely is this vehicle being driven in real-world conditions?
How Pay How You Drive Works
PHYD programs rely on telematics technology to assess driving behavior in everyday mobility. Data is typically collected via:
- Smartphone-based telematics
- Embedded vehicle systems
- OBD or IoT devices
- Connected car platforms
Behavioral indicators in a PHYD model may include:
- Adherence to speed limits
- Harsh acceleration and braking
- Cornering behavior
- Smartphone distraction while driving
- Driving smoothness and consistency
These variables are analyzed and translated into behavioral risk scores or pricing factors that complement existing actuarial models.
Unlike exposure-based models, PHYD does not primarily measure how often a vehicle is used. Instead, it evaluates how the vehicle is operated during each trip.
PHYD vs. PAYD
Pay How You Drive (PHYD) is closely related to Pay As You Drive (PAYD), but the two models address different dimensions of risk.
- PHYD focuses on driving behavior – how safely or aggressively a vehicle is driven.
- PAYD focuses on exposure to risk – how much, when, and where a vehicle is used.
Many insurers combine both approaches to build a more comprehensive Usage-Based Insurance model that integrates exposure and behavioral intelligence.
Why PHYD Matters for Insurers
Behavioral patterns such as speeding, aggressive acceleration, and smartphone distraction have a measurable correlation with accident risk.
PHYD enables insurers to:
- Identify safe drivers within traditionally higher-risk demographic groups
- Detect elevated behavioral risk early
- Improve underwriting precision through dynamic risk indicators
- Encourage safer driving habits through feedback and incentives
- Potentially reduce claims frequency through behavior change
Beyond pricing accuracy, PHYD can strengthen customer engagement. When implemented thoughtfully, it transforms insurance from a purely reactive model into a more preventive and interactive relationship.
Dolphin Technologies and PHYD Implementation
Dolphin Technologies supports insurers in implementing behavior-based insurance models through a modular telematics ecosystem.
With the MOVE SDK, insurers can integrate driving behavior assessment directly into their existing mobile applications. This includes real-time trip detection, distraction measurement, speed analysis, contextual warnings, and event-based communication that supports behavior change.
For insurers seeking behavior-based risk intelligence without operating a full telematics program, MOVE Score includes a driving behavior component (MOVE IQ). This evaluates risk-relevant patterns such as speeding, harsh maneuvers, and distraction, and translates them into aggregated behavioral risk intelligence that complements traditional underwriting.
Depending on strategic goals, PHYD logic can be implemented as:
- A behavior-based premium adjustment
- A scoring factor within an existing tariff
- A reward or incentive program to encourage safer driving
The focus is not only on measuring behavior, but on enabling prevention, coaching, and long-term portfolio stabilization through improved driving habits.