Cut premiums with pay-as-you-drive auto insurance |
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4. A variety of driving data can be collected. If insurance companies are only concerned with accurately obtaining the number of miles driven on the car, there are ways to do it without the need to install tracking equipment, Holober says.
For example, many states, such as California and New York, already require an emissions test on many cars on a regular basis. "Odometer readings could be collected (during these tests) and sent to insurance companies," he says.
However, high-tech data-collection devices could gather much more information. They can detect how fast you accelerate, how fast you brake and the time of day you drive, Holober says. These factors could be considered in your insurance rating, since they tend to reflect whether you're a safe driver.
Progressive's Hutchinson says that the first privacy question he usually receives from drivers is if Progressive is tracking their location, and the next question is whether the company is measuring their speed. The answer to both questions is no, he says.
"We don't track you with a GPS monitoring system, and we don't monitor your speeding habits," he says.
Customers also want to know what happens to the data that's collected.
"We have a privacy statement that's part of our terms and conditions. Consumers can access it on our Web site," Hutchinson says. According to the site, Progressive will not sell personally identifiable MyRate data to third parties. The company also won't use MyRate data to resolve an insurance claim unless it receives permission to do so from the driver or vehicle owner.
"We've tried to create this program as a way for people to save on their auto insurance and to be very respectful of individual private data at the same time," he says.
While the OnStar program does have a GPS tracking device, O'Donnell says that drivers are only sharing their location information with OnStar as part of its emergency assistance program.
"Customers have to be with OnStar first before they can opt in to our low-mileage discount program," O'Donnell says. At that point, the customer allows OnStar to share relevant information with GMAC insurance.
Regardless of the insurance company, pay-as-you-drive programs are voluntary, and just as customers opt in to them, they also can opt out by switching to traditional auto policies.
5. Exceeding the mileage limit could trigger a surcharge. A low mileage insurance program is supposed to save you money, but unwitting drivers actually could receive surcharges if they go over the low-mile limit. For example, under Progressive's MyRate program, rates could go up 9 percent if the driver goes over the limit.
Despite the possibility of an increase, Hutchinson insists there are no surprises.
Policyholders can look at their driving data online, view the number of miles they've driven during the policy term and determine if that number qualifies them for a low-mileage discount at their next renewal, he says.
With up-to-date access to discount eligibility information, drivers have a chance to adjust their habits before their policy renews. If consumers’ mileage is too high, they shouldn't be surprised if their discount disappears in the next policy term period.
"At the end of the day, what insurance companies want to do is to charge people enough to cover the risk on the policy," says Belden of Insurance.com. "They can more accurately cover this risk if real-life behavior is measured."
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