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An increasing number of the nation’s auto insurance companies have a new proposition: Let them track every second of your driving in exchange for an annual discount that can reach into the hundreds of dollars if you behave yourself on the road.
In theory, everyone wins here. Progressive, Allstate and State Farm — among the most aggressive of the larger companies that are pursuing this strategy — attract better drivers who crash less often. Customers who sign up for the optional programs can pay premiums based more on how they drive and less on their age, gender or credit history.
But usage-based insurance, as the program is known, generates vast amounts of data. While insurance companies are pledging to keep it to themselves for now, some experts believe that we’re only a few years away from companies’ contributing complete driver histories into a central industry database. Then, we’d all have driver scores like the numbers that FICO helps creditors calculate, which would follow us around whenever we shopped for a new auto insurance policy.
How quickly that day comes will depend on how many people allow insurance companies to ride shotgun in the near future, since they can’t create scores unless they can persuade us to share our driving data. To see how it felt, my wife and I let State Farm keep an eye on us this summer.
State Farm sent us a device that we plugged into a port under the steering wheel of our 2003 Toyota Highlander. That was all we had to do to begin; the machine wirelessly transmitted data about our movements to the company.
A few weeks later, we started getting feedback in the form of a report card that State Farm issues to customers participating in its Drive Safe and Save program. The company assesses drivers in five categories — acceleration, deceleration, turns, time of day and speed — with grades ranging from A to C. (The company didn’t want to hurt anyone’s feelings by flunking them.) The grades are then plugged into a formula that determines discounts.
For now, the company’s interest in a customer’s speed extends only to whether you’re driving more than 80 miles per hour, and if so, for how long. We did just a bit while in a 65 m.p.h. zone on the Massachusetts Turnpike and ended up with an A-minus grade in that category. Our lead foot on the accelerator led to our worst grade, a B-plus, in the acceleration category. The company has data showing correlations between higher claims and repeated instances of increasing speed more than 5 m.p.h. in less than a second. Our A-minus on deceleration meant that we didn’t slow down by more than 10 m.p.h. in less than a second too often, an indication that we weren’t slamming on the brakes much and were probably paying decent attention to the road.
Our A-minus on turns was a pleasant surprise given the number of curves we encountered while driving on vacation, but the device can measure the G forces exerted from each turn and we mostly passed muster there. Our only perfect grade was in the time-of-day category, as we didn’t drive during rush hour and we stay off the roads from midnight to 4 a.m. when the drunk and exhausted are out in force.
For our above-average efforts, State Farm said we would have qualified for a 22 percent annual discount on a policy with generous coverage limits in New Jersey if we drove about 10,000 miles a year, reflecting a $190 discount off an initial $870 premium.
Over all, participants in the program get an average of 10 to 15 percent off their premium, and everyone gets at least something for playing along. At Progressive’s Snapshot program, people who do qualify for the discount tend to save an average of 10 to 15 percent. Some other companies require you to keep the in-vehicle device for continuous monitoring (and possible price adjustments later) and may make you pay a fee for it plus some ancillary services; others ask you to send it back after six months but allow for a retest later upon request.
At the moment, State Farm and Progressive are not raising rates on people who sign up for monitoring and prove to be terrible drivers. Participation is voluntary, and Progressive, the early adopter in usage-based insurance, says that close to 15 percent of its customers are already enrolled.
Still, as more people sign up, the standard rate will start to feel like a penalty for those who decline to participate. And if all of the good drivers pile into the programs and qualify for lower prices, the companies may eventually raise rates on the holdouts. One bonus for parents who are on the fence: You can often use an insurer’s usage-based insurance or related tracking programs to monitor your teenager’s driving. And Safeco Insurance has an interesting twist, in which people who have gotten speeding tickets or been in accidents can use a monitoring device to requalify for the rate they had before the black mark went on their records.
Given all these incentives, why might someone hold out?
First, not every company offers a usage-based insurance policy. Our insurance company, USAA, does not, although it has started a pilot programto gather data. Geico has no program either, and a spokeswoman declined to comment on the reason. Progressive, State Farm, Allstate and others have policies or pilot programs, but people in certain states or who drive vehicles that are incompatible with the companies’ hardware may not be able to sign up or may not be able to share as much driving data.
But privacy is the biggest concern. While the major players are not yet tracking exact latitude or longitude, they would like to, and Progressive is testing it. “A mile driven on a highway is safer than a mile on a city street with lots of intersections, but in today’s world we don’t know which road you’re on,” said Dave Pratt, general manager of usage-based insurance at Progressive. Some customers are already asking for the company to track them in this way.
The companies probably have little interest in who you’re visiting or patronizing on any given day, but divorce lawyers and others may one day subpoena the information if insurance companies store it. The data can work in drivers’ favor too, though; one Progressive customer used his driving data to prove that he did not kill his infant daughter, who died of asphyxiation at her home. The company can also pull the data if you think it might help you avoid fault when you’re making a claim; so far, it is not doing this unless customers ask it to, though it’s hard to imagine that insurance companies won’t eventually be grabbing for the information while examining future claims.
For those of us with no privacy concerns, it’s difficult to make a solid case against usage-based insurance. For me, it turned driving into a game that could yield real money through safer behavior. Progressive’s data already shows that people learn to brake more gently within weeks of signing up; unlike with State Farm, Progressive’s device beeps when you’re slowing down too fast. The companies are betting that by giving safer drivers better deals, they will retain them longer and make up for the discounts with fewer claims over time. Plus, the front-runners in the industry will undoubtedly attract good drivers from competitors that don’t offer the discounts, leaving the laggards with potentially higher costs from those who remain.
The one lingering worry is that possibility of a FICO-like driver score. The leading companies in usage-based insurance say they want nothing of the sort. After all, they have more data than their competitors, so why would they share it?Unsurprisingly, the companies that could benefit from universal driver scores by helping insurers collect the data believe such a score is inevitable. “I don’t see how it doesn’t happen,” said David Lukens, director of vertical markets at LexisNexis Risk Solutions, which already helps auto insurers generate scores internally, ranging from 200 to 997. “There will be a tipping point where if most companies have this data, they’re going to weigh the costs and benefits of sharing it.”
While insurers currently promise to keep customer data to themselves, they could end that agreement starting on a certain date. In fact, it may be customers who ask them to do so when they inevitably go from feeling grateful for the discounts to feeling captive because no other company knows what a great driver they are. “People are going to want to say that the driving data is mine, and I want the ability to shop that around in the same way that they do with credit data,” said Brian Sullivan, editor of the Auto Insurance Report.
Which is fine, as long as the data is correct. It won’t be, because no system is perfect, though one hopes it will not be as error-strewn as credit reports are today. But that’s a concern for the future. For now, anyone with little to hide and a desire to drive better can help themselves to some free money while the insurance companies fight over the more careful drivers among us.
These systems use devices that plug into the ODB II ports in 1996+ model cars.
Therefore, they're plugging directly into the vehicle's powertrain control module (the main f'n computer). These are the same ports that over-the-counter code readers and professional scan tools alike are plugged into for the purpose of monitoring engine performance, emissions and diagnosis of problems.
I don't have a problem with this, for Joe Six Pack it's all about the discount. Not all companies use the same criteria. I'm with Esurance and their program is called Drive Sense. I can assure you that it has nothing to do with the time of the day that the car is driven.
Anyway, from what I can tell, the biggest criteria and discrepancy (with similar driving history) in car insurance rates in the United States is with which state you happen to live in.
Last edited by Slimprofits; August 17, 2014, 09:28 PM.
One would hope that the data is correct.....
...
Anyway, from what I can tell, the biggest criteria and discrepancy (with similar driving history) in car insurance rates in the United States is with which state you happen to live in.
DING DING DING!!!!
B I N G O !!!!
we have a winner....
(just ask anyone who has an address in MA but NH plates on the car in the driveway that is gone on the weekends...)
uhhh... howzabout: just the latest technobabble-inspired marketing gimmick ?
my prediction: in a few more years - if it takes that long - this will have gone the way of video disk rentals
Here's my take of what the insurance companies are really up to. The insurance companies will encourage people to use these devices by offering discounts that are substantive as shown by the anecdote provided in the article. The hope is that many, many drivers agree to install these devices in their cars to get a meaningful reduction in automobile insurance rates. At some point, a critical mass will be reached and the insurance companies will do an about-face. Drivers will get the regular rate, which will be called the new discount rate, only if they agree to have one of these devices installed in their cars; those who do not agree to install those devices pay a punitive rate. By regular rate, I mean that the new discount rate of insurance will be $870/year versus the current $680/year (the old discount rate) using the prices stated in the article.
I've had enough dealings with mealy-mouthed, weasel insurance companies to say that I am almost 100% certain that that is what will happen unless the insurance companies are either more strictly regulated or if they are unable to achieve a critical mass in acceptance of those devices.
and... kinda 'funny', isnt it - that in the few states that prevent such - and i happen to know from DIRECT EXPERIENCE - those particular states have among THE HIGHEST RATES IN THE US???
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while the states that allow credit scoring, have some of the lowest? (again, have seen this with my own rates, in these states)
Here's my take of what the insurance companies are really up to. The insurance companies will encourage people to use these devices by offering discounts that are substantive as shown by the anecdote provided in the article. The hope is that many, many drivers agree to install these devices in their cars to get a meaningful reduction in automobile insurance rates. At some point, a critical mass will be reached and the insurance companies will do an about-face. Drivers will get the regular rate, which will be called the new discount rate, only if they agree to have one of these devices installed in their cars; those who do not agree to install those devices pay a punitive rate. By regular rate, I mean that the new discount rate of insurance will be $870/year versus the current $680/year (the old discount rate) using the prices stated in the article.
I've had enough dealings with mealy-mouthed, weasel insurance companies to say that I am almost 100% certain that that is what will happen unless the insurance companies are either more strictly regulated or if they are unable to achieve a critical mass in acceptance of those devices.
while i agree on the mealy-mouthiness... since my obs is most insurance policies specifically limit or decline to cover whats most likely to happen, while piling on the verbiage to cover whats LEAST likely to happen...
methinks that by time that begins to happen - beyond a few % of all insured drivers - that THE BIG BACKLASH AGAINST BIG DATA WILL BE WELL UNDERWAY - with 'recovering FBA-types' - (facebook-socialmedia-aholics) leading the charge ;)
and... kinda 'funny', isnt it - that in the few states that prevent such - and i happen to know from DIRECT EXPERIENCE - those particular states have among THE HIGHEST RATES IN THE US???
Getty Images
while the states that allow credit scoring, have some of the lowest? (again, have seen this with my own rates, in these states)
Massachusetts has some of the highest car insurance rates in the country, and the Getty graphic indicates 0% difference based on credit scores.
Wyoming drivers enjoy perhaps the lowest rates in the country, and that chart shows a 114% differential based on credit.
The personal-finance website analyzed average repair, insurance and gasoline costs to rate all 50 states plus the District of Columbia from the cheapest to the most expensive, in terms of annual vehicle-ownership costs.
Do you think the industry is entering this field to make less or more money?
The point of this ridiculously obvious question is what?
The only two factors that I care about, as a consumer, are the price that I pay for the insurance and the service provided in exchange.
If Esurance raises my rates, I'll simply choose a new company. That is after all why I've moved from Geico to Commerce and now to Esurance over the course of the last seven years.
It's not as if the insurance companies don't already have access to our DMV/RMV and accident records.
You know, the point system? This sort of discount is fantastic for someone like me that is still being penalized by the State, five years after an at-fault accident, but with no speeding tickets or any other incidents since then.
Who am I supposed to be worried about Esurance sharing the data about my hard-braking? The NSA? I've got bigger fish to fry.
The personal-finance website analyzed average repair, insurance and gasoline costs to rate all 50 states plus the District of Columbia from the cheapest to the most expensive, in terms of annual vehicle-ownership costs.
Iowa took top honors, with an annual driving bill of just $1,942. It's one of three states where annual driving costs total less than $2,000; Ohio ($1,973) and Illinois ($1,999) were the other two. Conversely, Wyoming ran $2,705 per year. Louisiana ($2,555), Florida ($2,516) and Mississippi ($2,487) joined the Cowboy State as the nation's priciest places to own a car. Curiously, fourth-cheapest Idaho ($2,001) was $704 cheaper than its neighbor to the east, but $600 of that was because of Wyoming's sky-high gas prices.
eye get a kick out of em saying WY has 'sky high gas prices' - what, they only buy gas up in jackson hole or jellystone?
and that HI gas prices are lower??? - HUH!!??? - than where? (cept maybe norcal or mammoth... ;)
Lektrode, unless I'm reading this incorrectly, I think the insurance price data in the cars.blog backs up what you said about higher rates and no credit checks. It's merely a data point.
This is the same "news" outlet that relentlessly promotes the idea of sharing every aspect of one's life with the public and marketers and freely handing the data over to Google, Facebook, Twitter, and whatever the next hottest form of "social media" happens to be.
I'm waiting with baited breath for their investigation into the use of social security numbers as a means of personal identification.
In the meantime, luckily I'm capable of reading and understanding Esurance's privacy policies.
Last edited by Slimprofits; August 18, 2014, 07:57 PM.
I don't know. I can imagine a few ways this could evolve that might hurt.
1) Data feed shows quick acceleration/deceleration or speed before a crash and insurance refuses to pay out because of it.
2) Time of day pricing penalizes 3rd shift workers.
3) Selling the data to health insurance companies who raise corresponding premiums.
4) Selling the data to employers preventing some of the young and foolhardy from ever getting driving jobs later.
5) Selling the data to landlords like credit bureaus do just to profile renters further.
Some are more likely than others. But one thing I know about insurance companies is they will use any piece of data they can to refuse to pay out a claim and to raise premiums.
So what if you company hop for cheap policies if they refuse to pay out when/if you need it because of some stupid technical piece of data they acquired?
That's the real #1 potential future risk scenario I see for consumers with this sort of data evolution.
Then again, maybe you could sell people insurance for the event their auto insurance company uses data to refuse to pay out liabilities? Call it "bad driver insurance." Bidding starts at $40/mo.
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