How much is your personal information worth? Car insurance companies are offering discounts in exchange for personal driving data.
“Traditionally, auto insurers have based price on categories such as age, gender, where you live and the type of car you drive to determine the price of auto insurance,” says Ellsworth Buck, Vice President of GreatFlorida Insurance, Florida’s largest independent auto insurance agency.
Auto insurance companies are now offering plug-in devices or smart phone apps to track a driver’s habits. The devices monitor information such as, the number of miles driven in a day, the time of day or night a driver travels, as well as, rapid acceleration and hard breaking. In return, a safe driver could be eligible for up to a 30 percent discount.
The data gathered is used to evaluate accident risks. The idea is a tracking device will allow insurance companies to craft a more personalized auto insurance policy based on the customers’ specific driving patterns. In the future, usage-based insurance will allow insurance companies to reduce fraud claims, help in stolen vehicle recovery and process claims faster.
The goal is to identify safe drivers and entice them with discounts so they will remain loyal to the auto insurance company. Unfortunately, in the process these programs could expose riskier drivers making it more difficult to find affordable auto insurance.
“While discounts are appealing, an obstacle to usage-based insurance is privacy concerns,” says Buck with GreatFlorida Insurance, Florida’s top independent auto insurance agency. “Not all drivers are willing to share their private information.”
Chief Executive Glenn Renwick with Progressive, told the Wall Street Journal, “Progressive recognized from the beginning that it would be an uphill battle. Early company surveys of people’s interest in usage-based insurance revealed that about 40 percent of people had a viewpoint that was some variation on, ‘No way in hell.’”
Auto insurance companies realize earning the trust of customers will be key. Safeco’s website states, “We will not share the personally identifiable usage data we collect with any third party except to service your auto policy, for research as required by law.”
Their program, “Righttrack” offers an enrollment discount into their 90-day program. After the 90 days, they determine a final discount. The program is voluntary and free. A plug-in device is provided for participants.
Progressive has “Snapshot” a plug-in device that collects data about how much you drive, when you drive, changes in speed. Customers earn a discount based on their safe driving but risky driving can cause a rate increase at renewal.
After years of research Progressive concluded drivers have repetitive driving patters. Gathering data for a specific amount of time was sufficient to assess driving habits. Since 2008, close to 4 million drivers have participated in the Snapshot program.
Experts see usage-based insurance as inevitable despite privacy concerns. The economic benefits and convenience will outweigh apprehensions.