Based on this article, answer the questions. https://content.naic.org/cipr-topics/telematicsusage-based-insurance

Questions:

1. Many leading personal lines carriers now offer personal auto coverage that use a pay-as-you-drive (PAYD) rating plan. These plans have received regulatory approval and are now available in almost all states. What is the underwriting/actuarial reason a carrier might offer this kind of plan?

2. There are regulatory concerns that have been raised, and consumers in some areas, including California, do not have access to this program. Explain what these concerns are and why they present a risk to an insured who chooses this kind of plan.

3. Underwriters have a tremendous amount of information about the way insured autos are used when a PAYD plan is chosen. How might an underwriter use this information to improve risk selection and pricing?

4. Implicit in the NAIC article is a concern that PAYD may limit competition because of the cost and complexity of the technology a carrier would need to implement it. Describe what is involved and whether any solutions for this issue may be possible. [These solutions may not be in the posted article: think about what might be possible.]

5. It has been suggested that there are potential social and environmental benefits from a wide-spread adoption of PAYD rating plans. What are these benefits? Discuss whether these benefits outweigh the concerns you described in question 2.