Technology is constantly changing the way we drive, and, more recently, it is beginning the change how we think about automobile insurance. To set rates, insurers usually examine an extensive amount of information about the driver and the vehicle he or she drives. But by examining data gathered from telematics programs, producers may be able to more accurately evaluate a person’s chances of filing a claim.
Telematics refers to the use of technology to track driver data and transmit it remotely. Some of these systems are also designed to record a person’s driving habits for insurance purposes.
Progressive has already paved the way for modern technology to be used for vehicle coverage pricing. By installing one of their Snapshot devices, motorists are charged based on a usage-based system that monitors braking tendencies and how far and when a car is driven. This program may be a recommended insurance coverage option for people who maintain low annual mileage and good driving habits.
Aside from Progressive, a number of other large insurers are offering such programs. GMAC has been offering pay-as-you-drive discounts for OnStar customers for years. State Farm recently introduced its Drive Safe & Save program in 13 states. Allstate has launched a similar program, called DriveWise, in Illinois, Ohio, and Arizona. And the Hartford announced it would be rolling out a pilot program, called TrueLane, that would track driving data in exchange for possible discounts.
Possible Telematics Advantages and Disadvantages
Despite the potential auto insurance discounts for driving a car equipped with telematics, debates still rage as to whether it is worth it to give up a little bit of privacy. In programs that offer the possibility of discounts in exchange for installation of a telematics device, enrollment is optional.
A 2012 survey from Consulting firm Deloitte showed that about one-third of respondents would be willing to install a telematics device in their car to get a discount. But 42 percent of them said it would depend on the size of the discount, with about half saying the discount would have to be 20 percent or more to convince them to give up a little bit of privacy for some savings.
To help allay any privacy concerns, insurers that offer telematics programs stress that they do not track a driver’s location, only driving habits.