Insurance companies want to add devices to your car that can track your movements and monitor your driving. A new technology called telematics lets insurance companies see how you drive so they can tailor policies to fit your needs.
“Now that we can observe directly how people drive, we think this will change the way insurance works,” Dave Pratt of Progressive told the BBC. Pratt has installed a device that can monitor speed and braking on his teenaged son’s Jeep. The device lets Pratt know how his son is driving.
Telematics isn’t just for teenaged drivers. Insurance companies like Progressive and Allstate want to put such devices on everybody’s car. That will make it easier for insurers to create policies tailored for individual drivers.
Insurers Want to Track Everybody’s Cars
“The way we’ve done insurance now compared to what we can do is sloppy,” insurance industry analyst Mike Fitzgerald said. Under the present system car insurance rates are based on the categories individuals fall into. A person that belongs to a category of people with a higher accident rate pays more for insurance even if he or she is a good driver.
“Most people are actually overpaying,” Fitzgerald said of car insurance. The reason most people overpay for car insurance is that insurers have had no way to track individual drivers until now, he said.
Telematics devices enable insurers to see what speeds you drive, how much you use your brakes, and when you drive. These factors enable the company to create patterns of drivers and identify dangerous and safe drivers.
Persons that fit the safe driving profile might save as much as 30 to 40 percent on car insurance, industry consultant Joe Reifel told the BBC. Insurers want to hook up the devices so they can identify those who are less likely to make claims.
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One dark side of this technology is that insurers could raise rates for those who fit the dangerous driving pattern — or even cancel their policy. Another question: Would police have access to the data if there was a wreck?
Companies Say It Would Benefit Drivers
Some of America’s biggest insurance companies are already embracing telematics in a big way. There’s a strong possibility that your insurance company eventually will want you to use a telematics device. Current examples of the technology include:
- Allstate’s “Drivewise.” Those who connect the device to their car’s diagnostics system are promised “big savings.” Drivewise monitors mileage, speed, the hours you drive and the way you stop your car. Persons who don’t drive at night and make fewer hard stops would get a lower car insurance rate.
- Progressive’s Snapshot, which is included in some auto insurance policies. The insurer also offers a 30 day free trial period. Unlike Allstate, Progressive doesn’t reveal what data it collects.
- GEICO offers its GEOTAB telematics device for fleet insurance for commercial vehicles like trucks but not for private vehicles. GEOTAB is even more advanced than Drivewise or Snapshot; it actually lets the insurance company track vehicles’ locations and it monitors fuel usage. The company can pinpoint a vehicle’s location using GPS and GEOTAB.
With telematics technology your insurance company could raise your rates if you started driving or changed when you drive. A person who started working the night shift and started driving after dark might end up paying higher rates. Allstate already charges persons who drive after dark a higher rate. Drivers are three times as likely to get into an accident after dark.
If the potential of higher rates wasn’t bad enough, there are also serious security concerns. Allstate offers an app that lets drivers monitor their own telematics. That means it is fairly easy to gain access to the data and to hack it. Persons other than the insurance company could use its telematics to monitor your movements.
Would you use a telematics device if it saved you money? Let us know in the comments section below.