Photo (cc) by daveynin
Talk about driving a hard bargain: New auto insurance plans offer potentially big discounts if you drive less and better, but only if you can prove it to your insurer’s satisfaction.
They’re called pay-as-you-drive or pay-as-you-go depending on who’s selling them. (The technical term, which doesn’t exactly roll of the tongue, is telematics usage-based auto insurance.)
Whatever you call it, the concept is the same: let the insurance company electronically monitor your driving and, if you can prove you deserve to pay less, you might. Watch Stacy’s news story below, then and meet me on the other side for more details…
So, like the video suggested, the concept is simple. But the implications of allowing your insurance company access to your driving habits is anything but.
How it works
Pay-as-you-drive policies aren’t available from all insurers or in all states. Programs, potential discounts, and exactly what’s being monitored differ widely from carrier to carrier.
According to their website, GMAC’s policy offers discounts of up to 54 percent, and they track only your mileage through GM’s OnStar system. Other companies, however, go a lot farther.
Progressive’s Snapshot program – now offered in 27 states – requires that you plug a monitoring device into your car’s diagnostic port (available only on cars manufactured after 1996). The company then monitors your driving behavior for six months, including the number of miles you drive, the time of day you’re out, and how often and how hard you brake. Based on data collected during that period, you’re then offered a discount of from 0 to 30 percent. Progressive says enrolling in Snapshot won’t ever result in a higher premium.
Those driving between midnight and 4 A.M., however, need not apply. On the Snapshot page of Progressive’s website, you’re asked four questions: the state where you live, if you drive less than 30 miles per day, if you avoid driving between midnight and 4 A.M. and if you avoid sudden stops. If you respond saying you drive in the wee hours of the morning, the site comes back with “Since you drive between midnight and 4 a.m., you might not save with Snapshot.”
That alone is enough to drive consumer advocates to distraction.
“Some consumers simply don’t get to choose whether or not they’re driving at midnight,” Says Consumer Watchdog‘s Carmen Balber. “What if I work the third shift at a factory. What if I clean office buildings at night? I shouldn’t be penalized because my job requires me to be on the road at three A.M. simply because other drivers might be more risky at that time of night.”
Progressive’s Hutchinson counters that the program is voluntary and tracks only “how safely, how often, how far and when” you drive – at least the company doesn’t monitor where you’ve been or your speed.
Allstate’s Drivewise program, on the other hand, does monitor your speed. According to their website, they not only monitor your mileage, time of day and hard braking and accelerations, they also say “speeds over 80 mph will affect your rating.”
How much will you save?
The exact savings you’ll achieve by driving less or more safely is often unclear: a problem for consumer advocates. “No two policies are alike,” says Balber of Consumer Watchdog. “Some insurance companies will tell you directly what you’re savings will be, but other companies mix that in with a variety of factors.”
GMAC, for example, says on their website that if you’re currently paying $800 per year to insure your car, proving you drive only 5,001 – 7,500 miles annually will knock $270, or 34 percent, off your premium.
Progressive tells you nothing: you sign up for the program, pay $30 for a tracking device, drive around for six months, then they’ll let you know if you earn a discount, and if so, how much.
Will the experiment becomes the norm?
Whether you feel this type of tracking is an offensive invasion of your privacy or a great way to slash your insurance bill, one thing seems almost certain: this type of computerized monitoring is probably here to stay. Today’s technology supports it and it theoretically enables insurance companies to more closely align risk with cost.
For consumer advocates like Balbar, the mere existence of pay-as-you-drive isn’t the problem.
“If you’re someone who doesn’t mind having the insurance company riding shotgun in your car, tracking every move you make, then by all means, allow them to.” But, she adds, “Our concern is that consumer shouldn’t be penalized for choosing privacy.”
In other words, while allowing your driving habits to be monitored is the exception today, it may ultimately become the rule. If that happens, those refusing to allow their insurance company into their car could someday pay the price in the form of higher insurance premiums.