Peggy Coleman switched to usage-based auto insurance from Allstate. But in return your VW … [+]
When Peggy Coleman’s insurance agent told her about a new way to save money on auto insurance, she knew she had to try it. The solution Allstate called Milewise allowed her to pay only for the insurance she used, thanks to an emerging technology called vehicle telematics.
But there was a catch: Coleman agreed to install it a small device in the onboard diagnostic connection of your 2015 VW Beetle to qualify for the discount. It would track your mileage, speed, time of day and certain driving events like sudden braking.
“The cost of auto insurance was significantly lower with Milewise compared to a standard policy,” said Coleman, a sales director based in Tucson, Arizona.
before Miles at a time, she paid $ 1,750 a year to insure her car. The program – and driving them carefully – lowered that rate to $ 1,056 per year, a savings of 49%.
Sometimes the savings are automatic. At registration COUNTRY finances With the new DriverIQ program, a telematics tool that uses your smartphone, you get a 10% discount for every vehicle for which you are listed as a driver in the policy. Driving behavior, tracked and reported by the company DriverIQ dashboard, gives you an additional discount of between 1% and 25% for every six-month contract renewal.
“The data monitored by the app’s smartphone sensors – which is only shared privately between the customer and COUNTRY Financial – includes acceleration, braking, cornering, phone distraction while driving and overspeeding,” notes Felipe Teixeira, Director of National Auto Product at COUNTRY Financial.
The Allstate Milewise device.
Why everyone is talking about usage-based car insurance
Usage-based car insurance is hot. With more Americans taking road trips rather than flying during the pandemic, they are paying more attention than ever to auto insurance. (The main question: what happens when you go on a long trip? Fortunately, pay-per-mile programs are limited so you don’t end up with a huge bill.)
In one LexisNexis usage-based insurance study, nearly 9 in 10 drivers (88%) said they prefer car insurance prices based on their actual driving habits. In addition, another 71% of drivers said they believe telematics, including driving behavior data, is one of the fairest ways to price insurance when they see an advantage.
“There is widespread consumer interest in participation in usage-based insurance programs, and the growing number of connected vehicles is fueling that interest,” said Adam Hudson, vice president, Connected Car, LexisNexis Risk Solutions.
But how does vehicle telematics work and what does “Pay as you go” mean? What happens when an insurance company looks over your shoulder at the wheel? It turned out that this new technology can bring benefits to both the driver and the environment. But as with any new technology, there is a cost to using it.
What are telematics and pay-as-you-go insurance?
Allstate’s program is part of a new breed of insurance programs that use vehicle telematics to create pay-as-you-go insurance policies. they include Progressive snapshot, State Farm Drive Safe and Save and Nationwide SmartRide. On average, consumers can save between 5% and 50% on insurance with pay-as-you-go insurance.
The ideas behind these programs are enticingly simple: what if you could only pay for the insurance that you use? What if an insurance company could lower your premiums by verifying your good driving behavior in real time?
“Telematics revolutionized the auto insurance industry by providing insurers with real-time, personalized information about their customers,” said Stan Caldwell, Executive Director of Institute for Transport21 at Carnegie Mellon University. He says insurers can now assess risk based on a driver’s actual behavior rather than the demographic and geographic averages of many drivers.
“Customers who actually drive fewer kilometers and drive more safely than the average driver can save money,” he adds.
“Big Brother” questions
So how did it feel to have a bug in Coleman’s bug?
“At first I was concerned – like Big Brother is following you,” she says.
But after switching to Milewise, she saw Allstate gathering and using her data through the website. She could see that it was tracking her speed, whether she was stopping quickly, and whether she was driving after 11pm. She could also see her vehicle health summary on the website, including engine warnings, pending recalls, and location.
After seeing how the program works, she says the benefits outweigh the privacy concerns.
“Besides,” she adds, “our phones are tracking us anyway.”
Allstate says transparency helped allay the privacy concerns of customers like Coleman. The smartphone app provides the driver with information about his car and his driving habits, which is helpful to him – and which he is generally happy to share with an insurance company. The company also says it will never share personal information without the customer’s consent.
In states where Milewise and its Drivewise safe driving program are available, nearly 40% of its new customers sign up for connected plans. That’s double what the company saw at the start of the pandemic.
“More and more people are beginning to understand what telematics is and how it can benefit them,” said David MacInnis, Allstate vice president of Telematics and Usage-Based Insurance. “This is especially important now that driving habits have changed for so many people during the pandemic.”
The advantages of telematics explained
Insurance companies are not promoting usage-based insurance programs that rely on vehicle telematics as a one-size-fits-all solution, said Mary Boyd, CEO of Plymouth Rock Assurance.
“The real advantage of telematics and usage-based driving is the reduction in demands for safe drivers and the associated costs,” she says.
Boyd says that before telematics, drivers had a “set and forget” mentality. In other words, people pay for their insurance and never think about it. But now that your insurance company can reward you for the way you drive, it has become a hands-on experience. And they can even turn the whole process into a game, a process called gamification.
“In telematics, for example, there’s a gamification aspect that gives drivers the ability to strive for the best in order to get rewards like discounted premiums or monetary rewards,” she adds. For example, Plymouth Rock’s telematics program allows users to select a family sharing option. Not only does it allow parents, teenagers, and young drivers to monitor, but it also lets up to 10 family members compete for streaks, badges, and a spot on the top driver leaderboard.
Now there is a video game that all parents can support.
Of course, telematics and pay-per-mile programs are not for everyone. If you’ve had a couple of accidents – or have a reputation as a lead-footed driver – you might not want your insurance company to look over your shoulder. And if privacy is important to you (you carry a blackphone and refuse to use Google) then these programs are definitely not for you.
The economics behind pay-per-mile programs
Experts say pay-per-mile auto insurance has the potential to do more than just help individual drivers. You can help the drivers as a group.
“With more traditional auto insurance policies, safe drivers and low-mileage drivers subsidize mile-long and dangerous drivers to a certain extent because insurance companies ignore this important information,” said Cody Nehiba, assistant professor at Louisiana State University’s Energy Studies Research Center.
Instead, a pay-per-mile policy charges drivers for every mile, which provides an incentive for people to drive less.
“This reduction in driving could alleviate some transportation problems such as pollution, traffic jams and accidents,” he adds. “The inclusion of a telematics device enables insurance costs per mile to vary based on driving data as well, providing an additional incentive for safe driving. This incentive can lead individuals to drive slower and more cautious – again to reduce pollution and accidents. “
In other words: telematics devices and the corresponding pay-per-mile programs are helping safe and low-mileage drivers save money today. But you could also save some money for the drivers as a group and possibly reduce pollution.
The saving has its price
Brogan Woodburn who covers auto insurance for the auto location Detroit office, says he saved money with Progressive’s Snapshot program. His insurance costs dropped from $ 120 a month to $ 65.
“My rate has almost been cut in half,” he says.
But he says the results can vary.
“Remember, I work from home and only drive a few hundred kilometers a month,” he says. “I had a good overall safe driving score, but I think most of the discount was based on how little I drove.”
Woodburn compared several telematics programs and found that mileage was a major ranking factor for most of them.
“With some programs, it can be difficult for a driver to get a discount when they have a long commute to work, no matter how safely they drive,” he adds.
Are telematics and pay-per-mile right for you?
So should you go for one of these new pay-per-use auto insurance programs? Here’s how to find out if it’s right for you:
If you are a safe driver. If you’ve had no recent moving company accidents or violations, pay-per-use might be worth considering. How do you know if you are a good driver? Here is my current USA Today column this will help you answer the question.
When you don’t drive a lot. If your car has been parked in the garage for days, paying insurance by miles instead of a flat rate will likely lower your insurance bill. On the other hand, you may not need a car at all.
When you don’t worry too much about privacy. You share your location information with your insurance company. If you don’t want a third party to know where you are going, skip vehicle telematics and get regular auto insurance.
Coleman says she met all three of these criteria and is happy with her savings from Allstate’s Milewise program.
“I saved money,” she says. “I also like to be able to see how I drive.”