Usaged-based insurance tracks braking

Americans are willing to trade their driving data for cheaper insurance

We’re getting used to chauffeuring spies.

Consulting firm Towers Watson quizzed 1,000 drivers about UBI, short for “usage-based auto insurance.” These policies can cut your premium in exchange for letting the company track your driving habits with a small device that plugs into your car’s computer.

The study shows 8.5 percent of drivers now participate in a UBI program, up from 4.5 percent at the start of last year. The discounts usually fall between 15 and 30 percent, but can be as extreme as 54 percent if you barely drive at all. They’re negligible for bad drivers.

The good news is that insurers aren’t raising rates for bad driving, something 48 percent of drivers are concerned about. They’re more worried about price than privacy: Only a third of consumers are worried about being tracked, down from 42 percent last year.

Where usage-based insurance is available

According to Towers Watson, every state has at least four UBI options available right now. Many of the well-known insurers offer it, but not necessarily in every state.

If your favorite doesn’t, you may get a cheaper rate sticking with them than going to a new insurer, even after a usaged-based discount. You can learn about the major programs here…

Insurers refer to it as different things. It’s also known as “pay as you drive” insurance and “telematics insurance.”

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How it works

When you opt into one of these programs, the company will send you a tracking device to plug into your car’s diagnostic port. The location of these ports vary, but they’re designed to be within reach of the driver’s seat.

Some companies now offer smartphone apps to do the tracking instead. And if you’re with National General, you’ll use the OnStar system built into General Motors cars.

Once plugged in, the device starts collecting a variety of data whenever the car is on. The specifics vary from program to program but often includes some of these…

  • When you drive (e.g., late-night, day time, or rush hour)
  • Where you drive
  • How fast you drive (some only measure speeds above a threshold like 80 mph, others in ranges)
  • How far you drive (mileage)
  • How often you slam on the brakes

If you use a smartphone app rather than a device plugged into the car, you may also occasionally have to report things like odometer readings.

You may get access to some or none of that data, and you won’t know exactly how the insurer is using it. One thing’s for sure — it’ll come in handy to determine fault the next time you get in an accident. Maybe not handy for you, but handy for them.

There are some general things they tell you about how to drive to improve your discount: Routinely driving more than 30 miles a day is bad. Driving between midnight and 4 a.m. is bad. Hard braking is bad. (Definitions vary, but slowing more than 10 mph in one second is definitely bad.)

Should you participate?

Most insurers explicitly say it can’t hurt your rate right now. But you might reasonably be skeptical that they’ll change their minds later, when more people are on usage-based plans.

The people who most stand to gain from usage-based insurance are implied in the name — people who don’t use cars much. Safe drivers who have a short commute, people who work from home, or people who are retired and only drive occasionally.

Parents might also like this for their kids’ first policy, since some devices offer alerts for speeding or hard braking that can help teach them defensive driving.

But if you decide this potential discount isn’t worth the hassle, there are other ways to save on car insurance.

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