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Do auto tracking plans pay off?

By Jay MacDonald · Bankrate.com
Friday, March 21, 2014
Posted: 6 am ET

Perhaps like me, you've seen the commercials for those auto insurance policies that promise you'll save big by allowing your insurer to monitor your driving habits and you've wondered: What would Edward Snowden do?

While I have no idea whether the controversial NSA whistleblower-in-exile even owns a car, he almost certainly would have concerns over the growing trend of auto insurers offering discounts of up to 50 percent to those of us who don't mind if the company rides along and takes notes -- remotely, of course.

Popular programs

There's little doubt that consumers are intrigued by Progressive's Snapshot program, which advertises savings of up to 30 percent to those whose driving habits measure up to the insurer's expectations. According to Progressive, more than 1.5 million drivers, or roughly a third of all new customers, have chosen to plug in the Snapshot gizmo for 30 days to see if it will lower their premium.

Allstate says about one-third of its new customers have inquired about its Drivewise program. State Farm's Drive and Save program, which advertises savings of up to 50 percent, is bringing its share of customers in the door as well.

However, the three insurers admit that, among ride-along customers who qualify, the actual savings are closer to 10 percent to 15 percent rather than 30 percent to 50 percent.

What's more, the data that those little gadgets collect and the way the insurers translate it into discounts is still fairly mysterious to policyholders.

Hard braking and late-night driving

For example, in addition to logging how many miles you drive per day, Snapshot also tracks how often you slam on the brakes and drive between midnight and 4 a.m.

While logic might dictate that a vehicle at rest causes fewer accidents than one in motion, the other two measures are flawed and subjective at best.

That whole hard-braking test, for example, is an effect (crash) looking for a cause. How many hard-brakers do you know? And how many accidents are caused by failing to brake hard, rather than the opposite?

As for nighttime hazards, I worked the 4 p.m. to midnight swing shift for years with a spotless driving record, if you don't count doughnut crumb stains on the upholstery. Why? Elementary: There are far, far fewer cars on the road during the wee hours.

Rates can go up, as well as down

While the insurers imply that the data they collect can only lower, and not raise, your rates, the fine print sometimes says otherwise. As The Palm Beach (Fla.) Post reported recently, State Farm's Drive and Save website notes, "If you are currently receiving a discount for low estimated annual mileage (under 7,500 miles annually for personal use) and your vehicle is actually driven more than that threshold, your premium may increase at a future renewal."

Here's where it gets all Snowden scary. What are the insurers doing with the data they collect? What assurances do we have that their interpretation of our driving habits won't come back to haunt us without our knowledge at some future renewal time?

We drivers have a totally transparent way to demonstrate our safety skills. It's called a driving record.

What kind of record can -- and will -- insurers offer to demonstrate their safety skills with our driving data?

Follow me on Twitter: @omnisaurus.

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