Jump to content

Is Privacy Worth Sacrificing to Save on Insurance?


Recommended Posts

Is Privacy Worth Sacrificing to Save on Insurance?


Would you let your insurance company electronically monitor your driving if you knew it might result in a discount?

That is what the insurance industry is trying to figure out. There is a movement to create “pay as you drive” or “usage-based insurance” that would charge people based on not only how many miles they drive, but how they drive those miles.

The idea is that observed driving would let insurance companies gauge a driver’s risk more accurately. In turn, the company could charge more fairly than the current method, which relies on drivers to report risk factors, like how many miles a year they drive, themselves.

Here’s how it would work: if a driver agreed to it, a small monitor would be plugged into a car’s on-board diagnostic port to record when a car ran, how many miles it was driven, its speed, acceleration and deceleration. With a GPS, the monitor could also give a position.

This would give an insurance company a more accurate picture of a how much risk a driver presents. For instance, drivers who commute during rush hour are greater risk than those who drive when the roads are clear. And obviously, speed demons are considered a higher risk than conservative drivers.

“There is general interest and a desire on the part of a fair number of companies to move in the direction of offering pay-as-you-drive” products, said Dave Snyder, a vice president for the American Insurance Association.

Needless to say, the idea hasn’t been a big hit with privacy advocates, but that alone isn’t what has held the industry back. Pay-as-you-drive programs haven’t been practical for consumers because of the cost of the hardware, which is generally included in the cost of the insurance. That has changed. “The cost has dropped significantly,” said Charles Walsh, founder of Walsh Wireless Solutions, which makes car monitors. “The cost is down to $175 to $250, before it was $500 to $1,000 per vehicle,” he said.

Progressive Insurance first introduced a usage-based insurance program in 2004, then began to make it available more broadly in 2008. Called MyRate, it is in 19 states, though it varies from state to state. According to Progressive, market research shows that about half of their customers would consider a usage-based policy and that about one in four drivers offered the policy accepts it.

One of the more successful formulas, said Richard Hutchinson, general manager of usage-based insurance at Progressive, is to set a driver’s rate based on the standard formula and then give them a monitor with the promise that their rate won’t go up, but careful driving could result in a discount.

Still, he conceded, “If you want the freedom of driving aggressively, then this program is not for you.”



Link to comment
Share on other sites

If this becomes more widespread, self selection will be a significant signal to insurers. Chances are, if you opt out, you drive fast. That's sure to go into their actuarial tables, but they'll phrase it as a positive "discount for using the box" rather than "penalty for not having a box", which is what all insurance "discounts" are.

Link to comment
Share on other sites

Sadly, two companies (AAA and Titan) are thinking about making this manatory. The big question is if other companies decide to jump on this bandwagon too.

You'll still up able to buy "regular" insurance, just at a 35-40 percent mark-up (they would consider you high risk)

This, and the high c ost of gas start to make public transportation look good.

Link to comment
Share on other sites

Even though my record is spotless and I accurately declare my usage annually, even I would save more for this type of insurance. It could certainly do well to assist in the reduction of false claims, stolen vehicle costs and insurance fraud based on young drivers being insured under their parent's names and getting into countless accidents.


Link to comment
Share on other sites

Join the conversation

You are posting as a guest. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

About us

CheersandGears.com - Founded 2001

We ♥ Cars

Get in touch

Follow us

Recent tweets


  • Create New...