Although it has been around for more than a decade, usage-based auto insurance policies only recently began increasing in popularity across the United States. Usage-based auto insurance policies are ones in which policyholders agree to allow insurers to electronically monitor their driving and issue rate discounts based on the results. The insurers generally use either a combination of GPS and cellular technology, download info from the vehicle’s onboard computer or track vehicles using dash-mounted monitoring devices to determine how, when and where people tend to drive. People who drive safely and abide traffic laws can earn up to a 30 percent discount on their insurance rates.
Factors That Influence Discounts
Insurers generally are looking for how fast people go, how hard they brake, if they corner at high speeds and similar factors that indicate how safely people drive. Those who speed around corners are mostly likely to lose control and collide with another vehicle or object. Hard braking suggests the driver is following too closely to others. And speeders compound the risks of driving by going faster than allowed. If people drive often during peak traffic times, insurers will know and won’t give as much of a discount due to the increased likelihood of being in an accident, even if not at fault.
Rates Only Go Down, Not Up
Some people are concerned their auto insurance rates might rise if they sign up for a usage-based insurance policy. That’s not how the policies work. Standard underwriting practices remain when it is time to renew a policy. But the insurers realize that people generally drive in a safer manner when they know they can save money on their insurance rates by being safe behind the wheel. People tend to drive less and more cautiously. The average rate discount so far is about 15 percent, according to the National Association of Insurance Commissioners. That’s about $150 per year.
Would you let an insurer monitor your driving to save $150 on your auto insurance bill?