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:
- Are you a good driver?
- Are you comfortable with having your insurance company track your driving, including not only where you go, but how you drive?
- 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.