The US economy is certainly doing much better compared to the lows of 2009, but it’s no secret that many Americans consumers are still strapped for cash and looking to save every dollar they can. Since many people have already reduced their discretionary spending, that leaves them looking for ways to cut back on permanent, on-going expenses like car insurance. One way that many people have found to do precisely that is with the relatively new data monitoring and auto insurance discount program that many insurance companies are now offering. In this article we’ll look at some of the most frequently asked questions about this new discount opportunity so that you can determine whether or not this program is a good choice for your situation.
What is it?
The data monitoring car insurance discount is a fairly new discount program that is rapidly growing in popularity and being offered by more and more insurance companies. As the name implies it is a program that gives a discount to certain drivers based on their driving data which is collected and analyzed by the insurance company. This discount program is known by a variety of different names.
What other names does it go by?
Since this is still a fairly recent auto insurance feature it does not yet have a standardized name. Some of the most common names for the program include:
- Pay-as-you-drive insurance
- Pay-as-you-go insurance
- Usage-based insurance
- Mile-based insurance
These common terms for the policy type are in addition to the particular names each individual auto insurance company may dub their version of it. Some terms used by specific companies include:
- Drive Safe and Save – State Farm
- Snapshot – Progressive
- Drivewise – Allstate
- Low-Mileage Discount – GMAC Insurance
- IntelliDrive – Travelers
Why the discount?
The discount is offered based on the premise that safer drivers are less likely to be involved in accidents. Since this represents less risk to the insurance company they are willing to pass some of that savings along to consumers.
How much can I save?
Your savings will vary widely based on your insurance company, location, mileage, and of course driving performance. Some insurance companies will automatically give customers a discount, typically anywhere from 5%-10%, just for signing up. Additional discounts from the program may be anywhere from 5% to 50% or more.
Who can save the most?
Those who stand to benefit the most from these types of programs are drivers who are classified as high risk based on other traditional metrics such as age, gender, credit score, etc., but who are actually safe drivers who do not drive that much.
How is the data gathered?
Once a customer signs up for this these types of programs the data will typically be gathered in one of two ways. The insurance company may send the driver a small electronic device which is usually installed under the steering wheel or dash or the insurance company may work with existing services such as OnStar to gather the information.
What type of data is monitored?
The type of data monitored will also vary based on your particular insurance company. Some companies only monitor mileage driven, but most also monitor how hard the brakes are hit, and what hours of the day you are driving. Some companies may also monitor speed, rapid lane changes, and other metrics.
Will the insurance company know my location?
This is a hotly debated question. Some insurance companies state that they do not monitor the driver’s location while others report that they only know a general location. Other insurance companies may know exact GPS coordinates in some instances. It is best to check with your particular insurance company.
Are the devices permanent?
The devices can of course be uninstalled at the driver’s request which may result in the discount program being terminated. However, some insurance companies only gather data during an initial period and then use that data to calculate future rates. For instance Progressive’s “Snapshot” program only gathers data for 6 months and then the devices can be removed.
Are there any fees or out-of-pocket expenses?
Again this will vary from company to company. For example some companies may charge a fee of $5-$10 per month for the use of the monitoring device. Check with your insurance company for all applicable fees and charges.
Can this program improve safety?
It is speculated that this type of driving discount program may indeed help inspire greater safety. By incentivizing safe driving with lower rates it gives drivers an extra reason to be cautious. The feedback the devices provide can also help make drivers aware of problem behaviors they may not have even realized they were doing. Additionally since these programs reward drivers who drive less they may entice people into using alternate forms of transportation, thereby reducing traffic.
What concerns does this program raise?
The primary concern some people have about data monitoring devices is that they will violate drivers’ privacy. Some consumers also worry that they may be penalized by negative data.
Will anyone else have access to the information?
The insurance companies assure consumers that they will not sell or give the information to any third parties. However, the information may be admissible in criminal legal cases and perhaps also civil legal cases.
How prevalent are these programs?
The National Association of Insurance Commissioners reports that currently only about 1% of auto insurance plans include this program. However, they predict that within 5 years that figure will rise to 20% of all auto insurance plans.
How do I sign up for this program?
If you are interested in signing up for this program please contact your insurance agent to see if it is available with your auto insurance company in your state. Your insurance agent will also be able to provide you with more specific information relating to your policy.