The auto insurance industry is heading down a new road with so-called "pay-as-you-drive" insurance rates, based on a tracking system that monitors factors such as when and how far you drive each day, how many sudden stops you make, and more.
Insurers contend that basing rates on how drivers use their cars can cut rates, but privacy advocates say the system is too Big Brotherish.
Progressive Corp. was one of the first companies to adopt the system, and State Farm and Allstate Corp. now have similar programs, reports the Los Angeles Times
Rates based on such an in-car monitoring system are more fair because safer drivers and people who drive less have subsidized the costs for those who drive more or recklessly, proponents say. Insurers also predict that the system encourages safer driving or reduced driving, which could lead to fewer crashes and insurance claims.
But some consumer advocates are concerned about privacy invasion, especially State Farm’s inclusion of a GPS to track a vehicle's location. The company said it is not using such data to calculate premiums but rather to offer roadside assistance and other services.
The tracking devices tie into a car's diagnostic computer, which rules out vehicles made before 1996 because they do not contain standardized diagnostic ports. The devices track mileage, time of day, hard or extreme braking, and speed. State Farm also collects data on left and right turns, which it says are related to accident risk. The more sudden stops, for example, the greater the chance to rear-end another vehicle.
Insurance companies acknowledge that the product is not for everyone. "We knew right out of the box that some consumers would not want it because they don't want a box in their car gathering details on how they drive," said Daniel Kraft, who directs Allstate's new product and service development.
But Saman Jayasekara, a New Jersey software programmer who enrolled in Proressive’s program a few months ago, is happy he got on board. After a month, he received a 23 percent discount, which could save him hundreds of dollars a year.
"Everybody is scared of being monitored," Jayasekara said. "But I'm happy with my discount."
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