What is Usage-Based Car Insurance?

10
What is Usage-Based Car Insurance?

Insurance is one of the costliest parts of owning a vehicle and most drivers would do anything in their power to lower their rates. But would you go so far as to hand over your personal driving data?

A fairly new initiative, some insurance customers can now sign up to plug in a logging device to their car, which can track a number of variables to see what kind of driver you are, and possibly lower your insurance rates. Called “pay as you drive” or “pay how you drive” these new systems bring up a lot of questions.

WHAT IS IT?

progressivecloseupjpg-d95e58af51ea33afThroughout the US, Progressive Insurance offers Snapshot, a system that plugs into your car’s OBDII port and logs information about how you drive. Canadians also have this tech offered by Desjardins, called Ajusto. Even some insurance companies in Europe offer this kind of logging technology. The system determines whether or not you’re a safe driver and you can net a savings of up to 25 percent. But there are concerns that the insurance company might be horrified by your driving habits, increasing your premiums instead.

“So far they say that they will not increase your rates as a result of the information gathered from this technology,” explains Anne Marie Thomas from InsuranceHotline.com. “It’s all data and statistics, and that’s how insurance rates are set, on statistics. If statistically you’re in the low-risk range, then you should be paying less than those who are in the moderate or high-risk accident range.”

It doesn’t sound like a bad deal, but it’s important to know what information the insurance companies are looking at.

MILES

One of the main things that insurance companies want to know is how much you drive your car. While you may send rough numbers of how much you intend to drive your car in a year, it can vary from year to year. Insurance companies want to know exactly how much road is being covered by your car, and they will adjust your rates accordingly. For example, if you drive under 10,000 miles a year, you end up saving money.

“The less you drive, the less likely you are to be in an auto accident, and that should be reflected in your rates,” says Thomas.

The insurance company’s mindset is more miles means added risk, so if you drive less you’ll pay less for insurance.

SPEED

Insurance companies have reassured us that they don’t care about your actual driving speed, just your rate of acceleration or deceleration. If you accelerate 8 mph faster in one second, or decelerate 9 mph slower in one second, you’re considered to be slamming on the gas, or brake pedals, and driving erratically.

“Insurance companies consider this type of driving to increase your chances of getting into a rear-end accident,” Thomas explains. “If you’re following too close and adjusting your speed too much and too drastically, then you won’t get those discounts.”

The theory is that smooth driving habits are safer (and more fuel efficient too) and that if you’re not constantly hammering on the gas and brake pedals, then you’re a safer driver.

WHEN DO YOU DRIVE?

Progressive-image2The most comprehensive information that is collected involves when you drive your car. Depending on when you drive, you may encounter a lot of other vehicles on the road, and increase your chances of getting into an accident and making a claim. Categorized as high, moderate or low risk driving times, insurance companies will deem the riskiest times during rush hours due to the number of other motorists on the road with you, and past midnight when you might be drowsy and less alert.

The lowest risk times are non-rush hour times, like  5-7 am, 9am-4pm and 6-10pm. Weekend driving is also considered low risk. The more you drive during these low risk hours, the more you’ll save.

UNMENTIONED BENEFITS FOR PARENTS

progressive-snapshot-devicejpg-1897230c15a78be5For those worried about privacy, insurance companies allow you to see all the data that you’re providing them. Users can access the information on the web by logging in, and can see how their driving habits affect their insurance costs. This might not sound like much, but it can serve as help for parents who want to know if their inexperienced teenage-drivers are behaving responsibly behind the wheel.

“When your kids are learning to drive, you don’t really have the sense of how they do on their own,” Thomas says. “Being able to see that data is helpful, so you can gauge what they’re like behind the wheel when you’re not there.”

It’s not too intrusive to know where and how fast the car is going in the hands of your teenager, but it’s handy enough for parents to help teach the importance of accelerating and decelerating smoothly in addition to driving responsibly. It also helps to quantify the impact of driving poorly.

Families with young drivers have to pay extra to insure the newer drivers, but signing up for this kind of insurance logging can help bring down those costs, while teaching an important lesson to the inexperience drivers in the household. Equally valuable is the extra peace of mind to a parent.

IS IT SAFE?

4968253960_ce4eeaa487_bIt’s clear that the number one concern to customers is privacy. Progressive could change its policies in the future to log more data, or it could use your current data to increase your rates, rather than decrease them. Such bold moves would likely cause more customers to leave the insurance company or opt out of the program. Progressive has clearly spent time researching the reaction of the customer about what they are logging.

“Over the last ten years, we’ve tested several variables, including location and acceleration data. ” says Jeff Sibel from Progressive. “Our research shows that our current version, without location or acceleration, is appealing to consumers and provides us with an accurate picture of our customers’ driving habits.”

Early patents of the device list some GPS or cellular functionality to track your information, but it’s clear that customers weren’t comfortable with that data.

Other insurance companies have toyed with the usage based insurance idea. Another Canadian provider, Aviva, had a pilot program which was ultimately ended.

“The program was voluntary and we did not experience any issue with customer privacy concerns,” explains Aviva spokesperson Glenn Cooper, but he didn’t hint as to why the company didn’t follow through and offer the same program to all customers. “As it was only a pilot program, there was not a specific reason why we discontinued.”

NOT THE ONLY WAY TO SAVE

Progressive-image1

If you’re comfortable with trading discrete data about your driving habits for discounts on insurance, then these data-logging solutions will be a great avenue for you.

However, it’s important to know that by shopping around you can likely find lower insurance costs elsewhere, without having to resort to giving up potentially personal information about the way you drive.

“Sure you can get this technology to help you save money, but another way to save without any modifications to your vehicle is to just shop your rates,” Thomas says. “It’s entirely possible to find those savings at another company without resorting to the logging technology.”

So if you’re not comfortable with big brother watching, then you don’t have to sign up for it, and can save regardless just by shopping around.

  • FRS_Lover

    I’m a really slow cautious driver so I wouldn’t mind this. Although, all it’ll take is for my boyfriend to take one joy ride in my car for my rates to go up.

  • MistyGreen

    ha yea, and they get mad if you take it out of the car. I think they have a way of knowing.

  • MistyGreen

    I did it, and it saved 10% on my car insurance. I don’t have a lead foot, but I’m no grandma either. Fortunately, I think Progressive (as alluded to) doesn’t take fast acceleration into consideration. Obviously sometimes you have to slam on the brakes, but simply driving in a more fuel efficient manner results in you paying less to insurance. Win win! I don’t drive a ton (maybe 14000 miles/year) but we did take a long road trip during the few months we had the Snapshot, and still got our rates cut by like a hundred per year or so.

  • Alfie

    10 percent isn’t very much. Like the article says, you probably could have gotten that much if you just switched insurance companies.

  • Mike

    No way, no how. They may not raise rates now but they will, or cancel you. Wait till you’re in an accident and the police want to look at it or the other drivers lawyers. And especially progressive with their owner or CEO. People complain about big brother and you would actually do this to yourself. Not worth 10, 20 or even 50%.

  • http://dbcooper.livejournal.com P.F. Bruns

    I resent the “rate suckers” portion of the Snapshot campaign, because it insinuates that those of us (even those of us who use Progressive) who don’t want our driving habits tracked are somehow infringing upon some imagined rights accorded to Snapshot users. What’s really happening is that Snapshot users are simply trading intel to Progressive for a very nebulous hope of lowered rates, with no transparency as to what discounts will be offered for exactly what mileage, speed, travel areas, etc.

    No sale.

  • ColumWood

    Excellent point! There should be a clear way of knowing that if you drive a certain way, they will discount you a certain percent. It wouldn’t be the first time an insurance company screwed someone over.

  • MistyGreen

    This “very nebulous hope” turned into hundreds of dollars for me. The bottom line is, the actuaries over there give everyone a percentage chance of driving in a certain risky way, like driving at peak hours, driving a lot, braking heavily, etc, and combines that somehow with the expense of such behaviors. If you can prove the chance of you exhibiting those behaviors is less than average, then your cost goes down. There’s no argument of rights, just some people who think Progressive is going to sell this data to Russia or something. Honestly, why are people afraid of this? What are they going to do?

  • http://dbcooper.livejournal.com P.F. Bruns

    The idea that Progressive and other insurers would sell the data to Russia is a specious argument at best. I want to know what data are being collected and with whom it will be shared. Since the data are about me, I assert that right. No exceptions. And…”If you can prove the chance of you exhibiting these behaviors is less than average…”? If I don’t get the benefit of the doubt, if the company that wants to do business with me doesn’t trust me without sticking an electronic leash on my car whose data I am not allowed to see, then I take my business elsewhere. I don’t like being treated as though I’ve already done wrong when I haven’t. Period.

  • MistyGreen

    Wow, you REALLY don’t understand the point of statistics, do you? If they gave everyone the ‘benefit of the doubt’, they’d no longer be in business. That’s a hilarious notion you have there about the way insurance companies work.

    Also, do you know what data is (/are, since you seem obnoxious about that) being collected about you from your cell phone company? Did you dig until you were confident that you knew everything that was being collected by them? What about your internet provider? You don’t think they’re logging data usage (at the very least, the amount of it) for business development purposes? Have you found out about that? Maybe you have a store card for your local grocery store. When they connect your purchases to that card, do you know who it’s given to, or for what it is used? And do you have a credit card? Need I say more?

« Back
SWEEPSTAKES – OFFICIAL RULES, TERMS AND CONDITIONS

AutoGuide.com’s Monthly Overlay Newsletter Signup – By subscribing to our email newsletter, Entrants are eligible to win one (1) Amazon.com Gift Card (value of $100.00 USD). One (1) winner will be chosen every month at random and contacted by VerticalScope Inc.’s staff. *Amazon.com is not a sponsor of this promotion. Except as required by law, Amazon.com Gift Cards ("GCs") cannot be transferred for value or redeemed for cash. GCs may be used only for purchases of eligible goods at Amazon.com or certain of its affiliated websites. For complete terms and conditions, see www.amazon.com/gc-legal. GCs are issued by ACI Gift Cards, Inc., a Washington corporation. All Amazon ®, ™ & © are IP of Amazon.com, Inc. or its affiliates. No expiration date or service fees.

1. NO PURCHASE OR PAYMENT OF ANY KIND IS NECESSARY TO ENTER OR WIN THIS SWEEPSTAKES. AGE/RESIDENCY RESTRICTIONS, VOID WHERE PROHIBITED.

2. PRIZE: One (1) Winner will be randomly selected every month to each receive: one (1) $100.00 Amazon.com Gift Card (the “Prize Supplier”). Total approximate retail value of all prizes is approximately $100.00 USD. Prizes are not transferable and no cash or prize substitution is allowed. Prize package is awarded "as is" with no warranty or guarantee, either express or implied.

3. ELIGIBILITY: From the time of entry through the final date of prize fulfillment, each contest entrant and selected entrant must be a permanent lawful citizen and resident residing in the 50 United States or the District of Columbia or in Canada, and be twenty one (21) years of age or older. VOID IN PUERTO RICO, THE U.S. VIRGIN ISLANDS, IN ALL FOREIGN COUNTRIES OUTSIDE OF THE UNITED STATES, AND ALL OTHER U.S. TERRITORIES OR CANADA AND POSSESSIONS AND WHERE PROHIBITED OR RESTRICTED BY LAW. Employees, officers, directors, agents and representatives, of the Sponsor and the Prize Supplier and each of their respective parent companies, affiliates, subsidiaries, advertising and promotion agencies, promotion partners and any entity involved in the development, production, implementation, administration or fulfillment of this Sweepstakes, and the immediate family members (e.g., spouse, mother, father, sister, brother, uncle, aunt, nephew, niece, grandparent, in-law, daughter and son, regardless of where they live) and persons living in the same household (whether or not related) of such individuals are not eligible to participate or win. Only one selected entrant per household. All decisions of the Sponsor with respect to this sweepstakes are final. The Sponsor shall have the right at any time to require proof of identity and failure to provide such proof may result in disqualification from the Sweepstakes.

4. ENTER BY INTERNET: You may enter this sweepstakes via the Internet by logging onto AutoGuide.com and subscribing to our email newsletter via the pop-up overlay.

5. SELECTION OF WINNER: One (1) Entrant will be selected by random selection who have subscribed to our email newsletter. The winner may be announced publicly on AutoGuide.com and will be contacted by VerticalScope Inc.’s staff. The winner will be required to provide a mailing address (that is not a P.O. box) to receive the prize which will be shipped free of charge.

6. ODDS OF WINNING: Odds of winning a prize are determined by the total number of eligible entries received.

7. RESTRICTIONS: The prize package consists of one (1) Amazon.com Gift Card with an approximate value of $100.00 USD. If prize cannot be awarded due to circumstances beyond the control of the Sponsor or Prize Supplier, no substitute prize will be awarded due to the unique nature of the prize. Sponsor and Prize Supplier shall not be liable to the winner or any person claiming through winner for failure to supply the prize or any part thereof, by reason of any acts of God, any action(s), regulation(s), order(s) or request(s) by any governmental or quasi-governmental entity (whether or not the action(s), regulations(s), order(s) or request(s) prove(s) to be invalid), equipment failure, utility failure, internet failure, terrorist acts, threatened terrorist acts, air raid, blackout, act of public enemy, earthquake, war (declared or undeclared), fire, flood, epidemic, explosion, unusually severe weather, hurricane, embargo, labor dispute or strike (whether legal or illegal) labor or material shortage, transportation interruption of any kind, work slow-down, civil disturbance, insurrection, riot, or any other cause beyond Sponsor's or Prize Supplier's control (collectively, "Force Majeure Event"). Sponsor shall not be responsible for any cancellations, delays, diversions or substitutions or any act or omissions whatsoever by the performers/events, other transportation companies or any other persons providing any of these services and accommodations to passengers including any results thereof such as changes in services or accommodations necessitated by same.

8. CONDITIONS: By entering the Sweepstakes, entrants agree to be bound by the Official Rules, Terms and Conditions and that Sponsor has the irrevocable right to use in perpetuity entrants' names, user names, likenesses, photographs, voices, home mailing address, biographical and prize information, and entry materials, without notice to entrants and without compensation or obligation, in any and all media now or hereafter known throughout the world, in any manner whatsoever, to advertise and promote Sponsor, its products and services, the Sweepstakes, and for any other purpose except where prohibited by law. Entrant waives the right to assert as a cost of winning a prize any and all costs of verification and redemption or travel to redeem said prize and any liability which might arise from redeeming or seeking to redeem said prize. Sponsor is not responsible for fraudulent calls or emails made to entrants not by the Sponsor. If the Sweepstakes is not capable of running as planned by reason of damage by computer viruses, worms or bugs, tampering, unauthorized intervention, fraud, technical limitations or failures, any Force Majeure Event or any other cause which, in the sole opinion of Sponsor, could corrupt, compromise, undermine or otherwise affect the administration, security, fairness, integrity, viability or proper conduct of the Sweepstakes, Sponsor reserves the right, in its sole and absolute discretion, to cancel, terminate, modify or suspend all or any part of the Sweepstakes, and to select a winner from among all eligible entries received by Sponsor up until the time of such cancellation, termination, modification or suspension, as applicable. Sponsor reserves the right in its sole discretion to disqualify any individual that (i) tampers or attempts to tamper with the entry process or the operations of this Sweepstakes in any manner, (ii) violates the Official Rules, Terms and Conditions or (iii) acts in an unsportsmanlike or disruptive manner, or with intent to annoy, abuse, threaten or harass any other person. CAUTION: ANY ATTEMPT BY AN ENTRANT OR ANY OTHER INDIVIDUAL TO DELIBERATELY DAMAGE OR UNDERMINE THE LEGITIMATE OPERATION OF THIS SWEEPSTAKES IS A VIOLATION OF CRIMINAL AND CIVIL LAWS. SHOULD SUCH AN ATTEMPT BE MADE, SPONSOR RESERVES THE RIGHT TO SEEK CIVIL AND/OR CRIMINAL PROSECUTION AND/OR DAMAGES FROM ANY SUCH PERSON TO THE FULLEST EXTENT PERMITTED BY LAW. Any expenses and receipt and use of the prize and federal, state and local taxes and fees applicable in connection with the prize awarded are the sole responsibility of the winner. An IRS Form 1099 will be issued in the name of the winner for the actual value of the prize received. This Sweepstakes is subject to all federal, state and local laws of the United States. VOID WHERE PROHIBITED. Sponsor, Prize Supplier, and their respective officers, directors, parent companies, affiliates, subsidiaries and advertising and promotion agencies, employees, representatives and agents are not responsible for and shall not be liable for (i) any injuries, losses or damages of any kind caused by a prize resulting from acceptance, possession or usage of the prize, or (ii) printing, distribution or production errors. Sponsor or its affiliates may rescind any promotion found to contain such errors without liability at its or their sole discretion.

9. SPONSOR: The Sponsor of this contest is VerticalScope Inc. (the owner and operator of AutoGuide.com), 111 Peter Street, Suite 700, Toronto, Ontario, M5V 2H1.

Subscribe to our email newsletter and automatically be entered to win.
*Restrictions apply. See offer for details

Get Breaking Automotive News, Reviews and Video in your Facebook Feed!

Already Liked