Like in Lake Wobegon, the fictional town where all the children are above average, most people think they’re above-average drivers. Of course, everybody cannot be. But today you can prove whether you are and save money in the process.
Those who are truly safe drivers — and especially those who drive very few miles — might consider new voluntary auto-insurance programs that give discounts based on electronic monitoring of driving habits.
Devices attached to your vehicle can measure how many miles you drive, when you drive, how fast you go and how hard you accelerate, brake and corner. They are called “telematic” devices, and the programs are generically termed “usage-based” or “pay-as-you-drive” insurance. The idea is that cautious drivers who travel fewer miles should pay lower insurance premiums because they’re less likely to be in an auto accident.
But the big downside is relinquishing privacy — allowing your insurance company to compile all that information about your driving habits.
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Should you ask your insurance agent about installing a telematic device to get discounted premiums? Here are questions and answers to help you decide.
Q: What is it?
A: Typically, the insurer will mail you a small telematic device, which you install by plugging it into your car’s onboard diagnostic port (the OBD-II port), which in most cars is under the dashboard, near the steering column.
Programs go by different names. Progressive has Snapshot, State Farm has Drive Safe & Save with In-Drive and Allstate has Drive Wise, for example.
Q: What are the advantages?
A: A discount on your auto-insurance premium. It makes sense that if your actual driving habits are lower risk, you should pay less — otherwise you’re essentially subsidizing high-risk drivers.
Q: How big is the discount?
A: Progressive says 70 percent of more than 1 million drivers who signed up for its Snapshot program end up paying less for their insurance, saving about $150 per year.
State Farm claims usage-based discounts of up to 50 percent off your auto insurance, but a more typical discount is 10 percent. Allstate’s Drive Wise claims customers could reap discounts of “up to 30 percent.” Customers get 10 percent off their first policy period just for signing up.
The good news is that if the telematic device determines you’re a lousy driver, your rates probably won’t go up. Information is generally used only to lower rates through discounts. A side benefit: If the device helps you drive slower and eliminate rapid acceleration and braking, you’ll also save money by improving your gas mileage and spending less at the pump.
Q: What are the disadvantages?
A: Privacy; the Big Brother nature of the devices can be disconcerting.
“The first thing you want to look at is precisely what information the telematic device is capturing about the driver,” said Paul Stephens, director of policy and advocacy at the Privacy Rights Clearinghouse. “The worst-case scenario is GPS (Global Positioning System capability) for location tracking.”
Another issue is that collected data may become available for court proceedings. Stephens said it’s easy to imagine a scenario in which driving data is sought in a divorce case, especially if one wants evidence that the other is cheating.
“Everybody has their own threshold for what is right for them in terms of sacrificing their privacy versus saving money,” Stephens said.