Over the past few years, the cheapest auto insurance offerings have trended toward greater personalization of individual policies in an effort to apply more realistic risk models. At the same time, available benefits are more attuned to real-world values that extend beyond simply paying in the event of an accident.
Pay As You Drive Insurance: An Example
The biggest development in this arena is pay-as-you drive (PAYD) coverage. In this risk model, premiums are based on verifiable behavior — either total miles driven, or measurably safe driving habits.
Progressive, for instance, offers its Snapshot program in more than 30 states, with discounts running as high as 30 percent. Using a small device plugged into the vehicle’s diagnostic port, data is gathered on:
- miles driven,
- speed,
- time of day,
- and number of sudden stops.
Policy holders can track their own behavior by logging into the Progressive website. The company promises that rates will not be raised based on this information, but it does basically seek to create better drivers with positive feedback. The website shows a projected discount and hints on how to improve that number by:
- braking gently,
- driving fewer miles on average, and
- minimizing driving between midnight and 4 a.m.
Discounts begin to apply after 30 days of data has been collected. (It’s also important to know that the device does not contain GPS technology, so enrolled drivers are not being actively tracked.)
Auto Insurance Discounts That Modify Driver Behavior
Other companies, like Plymouth Rock Assurance in New Jersey, are accepting the reality of human behavior and trying to prevent accidents in a different way. They will reimburse policy holders up to $50 in cab fare once a year per policy, thus encouraging intoxicated motorists to get home safely and not get behind the wheel.
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Allstate, in a series of highly popular commercials, promotes its policies that include accident forgiveness, rewards for accident-free driving, and a vanishing deductible (automatic lowering of the deductible for every year without an accident.
Technologies That Actually Monitor Drivers
Although not necessarily an insurance product, there are technologies to actively monitor drivers, like Plug-N-Track, which allows family members (or in the case of company fleets, employers) to track location and bad driving habits in real time. The onboard device costs approximately $300 and monthly service runs around $20.
While such a service could be installed on a vehicle against a driver’s will, many opt into assistance offerings like OnStar that, at least in terms of location and status of the vehicle, do the same thing. An insurer might not be able to mandate the use of such a system, but they are highly likely to reward its presence with discounts, especially with high risk drivers like teens and elders.
A New Age of Auto Technology
The integration of auto technology and mobile computers — namely smartphones — is here. iPhone users with certain models of cars can control systems remotely like unlocking the doors, flashing the lights, starting the engine, turning on the AC, and more. Some cars even allow for pre-programmed driver profiles so teens, for instance, can’t start the engine unless they’re wearing a seat belt. The new generation of all-electric cars have accompanying apps for checking charging time as well as the current price of electricity at the time the car is plugged in.
Technology and cheap auto insurance will inevitably join forces. The popularity of the pay-as-you-drive model and the resulting deep discounts show that when risk is assessed in real time, prices plummet. Although some people argue this constitutes big brother watching everything you do, many cash-strapped customers who need the premium break are more than willing to be watched to prove they’re doing nothing wrong — and to be financially rewarded for that fact.