The Future of Automobile Tracking is coming to Car Insurance
For years, insurance companies have used estimates of your annual mileage to determine your car insurance rates. But with recent changes in technology, insurers now have an unprecedented ability to judge your actual driving habits.
Armed with detailed data on how often you slam on the brakes and what times of day you’re on the road, insurance companies are increasingly relying on precise, technological means of assessing risk – and using that information to set your monthly premiums.
When implemented well, analysts say, usage-based insurance can encourage drivers to behave more safely, lowering the risk of a crash and saving money all around. But as more Americans begin buying high-tech, connected cars that can talk to the Internet, other analysts say the rise of usage-based insurance raises uncomfortable questions for consumers and insurance companies alike.
Although many insurance companies say that agreeing to be tracked can only result in a discount, not a rate hike, those terms could always change in the future, analysts say. And people who drive safely one year but more riskily the next could effectively see their rates rise when an insurer decides to grant a smaller discount than before.
Insurers find behavioral monitoring attractive because it provides them with a clearer picture of the entire risk pool. By understanding better how each driver behaves, companies can design insurance plans that match a person’s risk and coverage more accurately.
More-sophisticated programs rely on a device that plugs into a special port near the steering columns of most newer cars. Beyond keeping an eye on vehicle speed and time of day, these devices can even take note of strong turns of the wheel, which may indicate unsafe swerving.
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