New Plan Saves on Car Insurance – But May Cost in Other Ways

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.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
7 Reasons You Should Not Claim Social Security Early
7 Reasons You Should Not Claim Social Security Early

The sooner you claim your Social Security retirement benefits, the more you — and perhaps also your spouse — stand to lose. Here are the stakes.

27 Things You Should Never Pay For — and How to Get Them for Free
27 Things You Should Never Pay For — and How to Get Them for Free

When you know the tricks, you can save big on all kinds of useful things that others pay for.

How Much of My Social Security Can My Ex Take?
How Much of My Social Security Can My Ex Take?

A man wonders if his ex-wife will siphon away his Social Security benefit.

5 Ways Retirees Can Lower Their Income Taxes
5 Ways Retirees Can Lower Their Income Taxes

Here’s how to keep Uncle Sam’s mitts away from your nest egg.

How to Achieve Your Financial Goals in 2020
How to Achieve Your Financial Goals in 2020

New year, new you. Get your finances on track with the help of these tools for investing, saving, budgeting and earning.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
10 Things Frugal People Never Buy
10 Things Frugal People Never Buy

If you’re a true tightwad, the mere thought of spending money on these items gives you the willies.

10 Useless Purchases You Need to Stop Making
10 Useless Purchases You Need to Stop Making

You might as well flush your money down the loo if you spend it on these things.

7 Social Security Rules Everyone Should Know by Now
7 Social Security Rules Everyone Should Know by Now

Confusion over Social Security is a shame, considering how many of us will need this money badly.

If You Find This Thrift Shopping, Buy It
If You Find This Thrift Shopping, Buy It

They don’t make coffee makers like this anymore.

7 Social Security Benefits You May Be Overlooking
7 Social Security Benefits You May Be Overlooking

There’s more to Social Security than retirement benefits.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

14 Things You Should Stop Buying in 2021
14 Things You Should Stop Buying in 2021

These convenient household products come with hidden costs that you might not have considered.

The 6 Best Investing Apps for Beginners
The 6 Best Investing Apps for Beginners

If you’re looking to ease into investing in the coronavirus economy with just a little money, check out these easy-to-use tools.

Is Writing a Check Still Safe?
Is Writing a Check Still Safe?

Every time you pay by check, you hand your bank account numbers to a stranger.

8 Things You Should Replace to Improve Your Life Today
8 Things You Should Replace to Improve Your Life Today

Being frugal isn’t smart if you put off replacing these items.

6 Ways to Protect Your Retirement Accounts From Hackers
6 Ways to Protect Your Retirement Accounts From Hackers

Imagine having $245,000 stolen from your retirement account — and not being reimbursed.

9 Mistakes People Make When Cleaning With Vinegar
9 Mistakes People Make When Cleaning With Vinegar

Cleaning with vinegar can save you a lot of money, but using it like this can cost you.

13 Amazon Purchases We Are Loving Right Now
13 Amazon Purchases We Are Loving Right Now

These practical products make everyday life a little easier.

7 Income Tax Breaks That Retirees Often Overlook
7 Income Tax Breaks That Retirees Often Overlook

Did you realize all these tax credits and deductions exist — or that they apply to retirees?

7 Kirkland Signature Items to Avoid at Costco
7 Kirkland Signature Items to Avoid at Costco

Even if it seems you save a bundle buying Costco’s Kirkland Signature brand products, they may not be the bargain they appear to be.

7 Hidden Sections of Amazon Every Shopper Should Know
7 Hidden Sections of Amazon Every Shopper Should Know

These little-known departments of Amazon are gold mines for deal-seekers and impulse shoppers alike.

7 Costly Health Problems That Strike After Age 50
7 Costly Health Problems That Strike After Age 50

As we age, our bodies wear down. Here is how to cut costs associated with some common ailments.

This Is the Most Dependable Car Brand in the U.S.
This Is the Most Dependable Car Brand in the U.S.

This brand’s vehicles are least likely to give drivers repair headaches, according to J.D. Power.

7 Things I Never Buy at Costco
7 Things I Never Buy at Costco

A bulk buy isn’t always the best buy.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.