Letting your insurer ride shotgun — for a discounted rate
It’s like the Elf on the Shelf, but for car insurance. Call it the mole on the console.
Drivers willing to give up a little privacy are becoming familiar with a multitude of apps that track their behavior behind the wheel and in exchange are getting decent discounts on their premiums — as long as they lay off the gas and don’t brake too hard too often.
In a television commercial for one offering, State Farm pitchman and pro quarterback Aaron Rodgers exclaims, “Don’t mess with my discount,” while a fictional sports agent tries to goad him into driving recklessly and “Breaking the Law” by Judas Priest blares from the car’s speakers. Rodgers’ insurance agent — his “other agent” — had previously explained that the safer he drove, the more money he would save, with the Drive Safe & Save app.
Rival usage-based programs, offered where regulations allow, include Signal from Farmers, Snapshot from Progressive, Drivewise from Allstate, RightTrack from Liberty Mutual, DriveEasy from GEICO and SmartRide from Nationwide. Root Insurance, a recent startup, does not offer traditional policies — its drivers must be willing to be monitored. Roughly 10 percent to 20 percent of customers choose these programs; the figures vary by state.
The data recorded by the apps can include braking, acceleration, speed, miles driven and cellphone use while driving. The companies vary only slightly in determining what makes a safe driver. Proponents of this insurance play up the potential savings, the financial motivation to drive with care and the emissions reductions resulting from fewer miles driven. Critics of such programs call the apps “the spy in your car.”
Most of the programs use a smartphone’s global positioning sensor, accelerometer, gyroscope and magnetometer — essentially a compass. State
Farm uses a Bluetooth device to activate the app when the car door is opened.
Other programs use a tracking device plugged into the car’s OBD-II diagnostic port. Some offer a choice of using your smartphone or installing an OBD-II device. Still others gather data through General Motors’ OnStar telemetric system.
Most programs provide a 10 percent discount against the price of a standard policy on sign-up and reward good driving with additional discounts. Several states limit the initial discount to 5 percent or less.
Some programs will rescind the initial discount and may even raise rates if drivers can’t keep their foot off the throttle or rack up a lot of mileage, use their cellphone while driving, frequently brake hard or commit other violations. But for most drivers, this usage-based insurance is less expensive than a conventional policy, and for cautious drivers who don’t often drive, it can be considerably less expensive.
Real savings vary depending on driver performance and the specifics of each program, and they range from that initial 10 percent discount to about 50 percent. Allstate reports that 50 percent to 60 percent of all drivers in its Drivewise program earn safe driving benefits beyond the initial discount.
Scott Bruns, a State Farm director, said: “The average discount is between 10 percent and 15 percent, but we regularly see customers receiving 20-30 percent discounts. The maximum is 50 percent.”
Insurers indicated that the discounts were supported by an improvement in what is known as loss ratio — claims paid and adjustment expenses versus premiums earned — thanks to more cautious driving by people who use the apps.
“When customers use SmartRide, they earn an average discount of 21 percent,” said Teresa Scharn, an associate vice president at Nationwide. “That’s directly correlated to the loss ratio improvement of 21 percent we see. We’re giving the 21 percent back to the customer.”
Root Insurance’s policies work somewhat differently. Root sets a rate after an app records driving data over a 30-day trial period, then maintains it — generally for the life of the relationship. About 15 percent of drivers who complete the 30-day trial are denied coverage. The rest are billed considerably less than what a conventional policy might cost.
“For the best drivers, we can reduce their insurance rate by 52 percent,” said Dan Manges, a co-founder of Root and its chief technology officer.
These discounts are not available in the state perhaps best known for its commutes and traffic: California, whose insurance department bars the use of driving for setting rates. Privacy is a chief concern.
For now, most of these programs are optional, but the day may come when insurance companies will be watching every driver on the road and basing their billing on those observations.
“Like it or not, the world is going to that,” said Jeffrey Lake, a Farmers agent in Grand Rapids, Mich. He said he expected that most auto insurance policies would be usage-based in 10 to 15 years.