Around 1% of those with auto insurance are using usage-based programs to try for discounts on their auto insurance premiums. But according to NASDAQ’s “The rise of usage-based auto insurance,” that number is rising. In the next five years, some estimate that as many as 20% of drivers could be using usage-based programs. They even predict that 30% of drivers will be using them by 2020. Usage-based insurance, or UBI, allows your auto insurance company to place a device in your car to monitor your driving habits. They can determine when you drive, how often, how far, how fast you are accelerating, as well as your braking habits. Companies advertise discounts of up to 30% when you use their UBI, if you are found to have safe driving habits.
When asked, drivers said that they are happy to give up some privacy in exchange for a discount on auto insurance rates. Between smart phones and Facebook, people are used to giving up some of their privacy, so they willingly participate in UBI services. In fact, companies who are not currently using this technology, or at least in the development process, are pretty far behind and risk losing some customers. At some point in the future, drivers may end up paying higher premiums if they don’t allow their insurer to track their driving habits. It’s unlikely that insurers will force drivers to share UBI information, but collecting this data will likely become the norm in the future.
Here is a summary of some of the companies offering usage-based insurance. First of all, you do have to have a car that is newer than a 1996 model. Drive Wise is offered in three states by Allstate, but they plan to expand the program later this year. American Family Insurance has tested their product and is currently developing a plan to implement it. Esurance has teamed up with Sprint to collect UBI data, but it is only available now in Texas. GMAC collects data through OnStar. The Hartford insurance works with Octo USA to collect data for their TrueLane program, currently available in five states. Progressive’s Snapshot is available in most states and even non-customers can try it out. Travelers has started using IntelliDrive in four states. Safeco offers the Rewind program to some customers who are trying to avoid rising premiums after violations. State Farm’s Drive Safe & Save program also works with OnStar and is available in 14 states. Have you taken advantage of UBI yet?