"Pay as you Drive" Technology Enables New Car Insurance Discounts

Auto insurance companies like Progressive, Travelers, Allstate, The Hartford and GMAC are introducing new ways for drivers to save on auto insurance with onboard driver monitoring technology. While some groups express concerns over consumer privacy, good drivers are taking advantage of a way to save more money on their car insurance rates. These behaviorally focused, Pay As You Drive (PAYD) programs are gaining steam in many states. Good drivers see it as a way to finally institute fairness for insurance rates.

Rates Based on Driver Behavior

Progressive Insurance has been one of the leaders in this new technology with its MyRate program, recently extended to include drivers in Rhode Island. This adds to the already 15 states participating in the program. The company asks drivers to install an electronic device in their vehicles that monitors their driving habits. The system records how often the car is driven, how safely it is operated and at what times of day it is on the road. Analyzing this information allows insurers to give better rates to infrequent and safe drivers who are not traveling during high-traffic times of day.

This is not Progressive’s first attempt at a driver-behavior driven rating program. The company previously instituted satellite-based programs, but drivers were nervous about having cameras on their every move. By installing a device that only tracks time, mileage and movement, not the vehicle's actual location, the company has found a way to balance its desire for more detailed information and the consumer’s desire for personal privacy.

How Much Can You Save?

Drivers on the MyRate program save as much as 25 percent on their car insurance bill. Even with the expense of purchasing the units and instituting the program, safe driver programs like this save insurers so much in claims costs that they can offer deep discounts while still increasing profits. 

Drivers might also suffer negative consequences from participating in the MyRate program. For instance, those who turn out to have driving habits worse than the norm could see a rate increase. To avoid this problem, Progressive agrees to let drivers opt out of MyRate if it appears their rates may increase because of the program. After the first 30 days on the program, drivers will know how well they perform by viewing their tracking data online.

How Much Does it Cost?

The MyRate program is not free. Consumers must pay $30 semi-annually to participate. This fee covers the device and data transfer costs. According to Progressive, most drivers in the program save 10 to 15 percent on their car insurance premiums. The average savings works out to about $50 or so, depending on the individual.

While Progressive’s program lets the driver install the MyRate device, other programs require a mechanic. Travelers’ has been testing a program in which the device requires a technician to hardwire it into the vehicle. The Hartford is testing a wireless device that uses technology called telematics that combines wireless technology, Internet access and global positioning systems to transfer data. This is similar to the technology used by onboard emergency systems line OnStar. 

GMAC has been using its successful OnStar technology for insurance rating purposes for a while now. It offers discounts from 13 percent to a whopping 54 percent for drivers in some states. GMAC appears to have the advantage in potential savings for consumers since the company offers bigger discounts. OnStar customers are paying for the device already, so there is no additional expense. 

Certainly, GMAC’s program is the least intrusive and most accepted form of PAYD programs. But for those not driving OnStar-equipped vehicles, GMAC cannot offer the discount. Right now, that leaves only Progressive’s MyRate program for vehicles not equipped with OnStar.
 

Jessica Bosari is an Internet copywriter and blogger for various publications and her own blog. You can read more of Jessica's work here.