Is usage-based auto insurance good for the consumer?

A number of major auto insurance companies are adopting pilot programs around so called “usage-based” insurance tracking and benchmarking technologies (including GPS, OnStar, and custom devices). These technologies enable insurance companies to determine the cost of your insurance by, among other things, how much you drive. For the moment at least, this option is completely voluntary.

So, should you consider volunteering for these kinds of programs?

First of all, not all auto insurance companies provide this service but many are testing it. Among the most prominent that offer it today are Progressive and GMAC Insurance. Many of these programs are just in the beginning stages, but if people become comfortable with the idea, we could see these usage-based insurance policies become core products among providers at large.

At this premature stage, when deciding whether or not to voluntarily participate in these programs, you may want to consider the following:

  1. Are you a good driver?
  2. Are you comfortable with having your insurance company track your driving, including not only where you go, but how you drive?
  3. Are the possible discounts (up to 30% according to Property Casualty 360) worth any anxiety about #2?

If you answer “yes” to all of those questions, perhaps you should talk to your insurance provider (or look into switching providers) about volunteering for one of these programs. Even if you don’t participate now, sometime in the future these programs may move from voluntary to mandatory as insurers weigh the pros and cons of calculating your insurance premium by your actual driving style versus today’s primary factors such as age, gender, car type, historical driving record and even credit score.

Please let us know what you think about this new trend in auto insurance in the comments.

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5 Comments on "Is usage-based auto insurance good for the consumer?"

  1. Delmar August 11, 2011 at 5:18 am · Reply

    This is again another way of padding the pockets of Insurance.. It’s bad enough that they (Insurance Co) got the states to Force us all to carry insurance but now they are going to force us all to do this program too… When will it stop…?

    • Chad Catacchio August 11, 2011 at 9:24 am · Reply

      Thank you for leaving a comment. As I mentioned in the post – at least for right now – this is an opt-in only service.

  2. l. blumenthal August 10, 2011 at 11:29 am · Reply

    Nothing insurance companies do is EVER good for the consumer

  3. L Blumenthal August 10, 2011 at 11:28 am · Reply

    VERY scary! If you drive a lot one month, it could skew your results and cost you more for the whole next year. TOTALLY TERRIFYING! Like having big brother IN THE CAR WITH YOU!!!!!!!! I don’t hardly drive in the winter; in the summer, I go back to see my mother several times. Depending on when they look at the driving, it could be so way off . This is a truly frightening concept. It may make me cancel onstar, although I love it and use it all the time.I am petrified of anything that could cost me more.

    • Chad Catacchio August 11, 2011 at 9:03 am · Reply

      Thank you for leaving a comment. Yes, privacy concerns will certainly be at the top of mind for many when considering this type of insurance.

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