Twisted Titan
26th December 2010, 05:06 PM
http://www.nytimes.com/2010/12/26/automobiles/26INSURE.html?_r=3
CAR insurance rates have always been based on risk, and risk has usually been measured by the number of miles driven. So drivers often underreport the miles they travel to keep their rates low — at the expense of other drivers.
But a form of insurance that requires electronic verification of miles driven, in return for a discount, is gaining popularity. These so-called pay-as-you-drive policies — miles are often tracked through a GPS system in the car — are now offered in more than half of the states and are spreading, albeit slowly, despite privacy concerns.
Progressive Insurance, which began selling pay-as-you-drive policies in 1998 and now offers them in 27 states, said acceptance was strong among those eligible. “Approximately one in four customers are choosing this,” said Richard Hutchinson, Progressive’s general manager for usage-based insurance.
Several factors are driving the growth. One is that the cost of GPS systems and data devices has plunged, making tracking more economical. For less than $100 companies can buy trackers that simply plug into the diagnostic port required on cars made after 1996.
In addition, people are more comfortable being monitored, having grown accustomed to sharing information on Web sites like Facebook and Twitter, and through phone applications like Foursquare and Google Latitude that show where they are.
Insurers have also decided to collect less information than they once anticipated. GMAC Insurance, which offers pay-as-you-drive coverage in 35 states, uses the OnStar system in General Motors cars only to confirm miles driven. “Mileage is pretty innocuous,” said Tim Hogan, vice president for national accounts. “When you talk about time of day and speed, people become more concerned.”
Initially, the idea was that the insurers would collect data on what streets a driver takes, at what time of day and how aggressively he drives. Insurers would then determine risk based on behavior as well as mileage.
Progressive was at the forefront of this movement in the United States, but has reduced the scope of the data it uses to rate drivers — for instance, by excluding location and speed. And it has changed the name of its plan to Snapshot Discount because it sets a discount after 30 days of data collection. After monitoring a driver for six months, it removes the monitoring device.
At the nontech extreme of pay-as-you-drive is MileMeter, which requires only that drivers photograph their odometers when they buy the policy and then at six-month renewal intervals. Available only in Texas, MileMeter sells coverage for a specified number of miles. If the customer buys 5,000 miles but drives only 3,000, he gets a 2,000-mile credit on the renewal.
Some insurers expect drivers to let themselves be closely tracked — eventually. “There are lingering concerns about privacy,” said Robert Hartwig, president of the Insurance Information Institute, a trade group. “But that barrier is breaking down.” The Facebook generation, he said, sees it “as normal to have interactivity with companies that they buy products from.” [/img]
CAR insurance rates have always been based on risk, and risk has usually been measured by the number of miles driven. So drivers often underreport the miles they travel to keep their rates low — at the expense of other drivers.
But a form of insurance that requires electronic verification of miles driven, in return for a discount, is gaining popularity. These so-called pay-as-you-drive policies — miles are often tracked through a GPS system in the car — are now offered in more than half of the states and are spreading, albeit slowly, despite privacy concerns.
Progressive Insurance, which began selling pay-as-you-drive policies in 1998 and now offers them in 27 states, said acceptance was strong among those eligible. “Approximately one in four customers are choosing this,” said Richard Hutchinson, Progressive’s general manager for usage-based insurance.
Several factors are driving the growth. One is that the cost of GPS systems and data devices has plunged, making tracking more economical. For less than $100 companies can buy trackers that simply plug into the diagnostic port required on cars made after 1996.
In addition, people are more comfortable being monitored, having grown accustomed to sharing information on Web sites like Facebook and Twitter, and through phone applications like Foursquare and Google Latitude that show where they are.
Insurers have also decided to collect less information than they once anticipated. GMAC Insurance, which offers pay-as-you-drive coverage in 35 states, uses the OnStar system in General Motors cars only to confirm miles driven. “Mileage is pretty innocuous,” said Tim Hogan, vice president for national accounts. “When you talk about time of day and speed, people become more concerned.”
Initially, the idea was that the insurers would collect data on what streets a driver takes, at what time of day and how aggressively he drives. Insurers would then determine risk based on behavior as well as mileage.
Progressive was at the forefront of this movement in the United States, but has reduced the scope of the data it uses to rate drivers — for instance, by excluding location and speed. And it has changed the name of its plan to Snapshot Discount because it sets a discount after 30 days of data collection. After monitoring a driver for six months, it removes the monitoring device.
At the nontech extreme of pay-as-you-drive is MileMeter, which requires only that drivers photograph their odometers when they buy the policy and then at six-month renewal intervals. Available only in Texas, MileMeter sells coverage for a specified number of miles. If the customer buys 5,000 miles but drives only 3,000, he gets a 2,000-mile credit on the renewal.
Some insurers expect drivers to let themselves be closely tracked — eventually. “There are lingering concerns about privacy,” said Robert Hartwig, president of the Insurance Information Institute, a trade group. “But that barrier is breaking down.” The Facebook generation, he said, sees it “as normal to have interactivity with companies that they buy products from.” [/img]