Have you ever pulled up to a Target and found that your email and social media accounts are suddenly inundated with advertisements for Target? I have, and although I appreciate the coupons at times, I’ll admit that the thought of a major company tracking my whereabouts makes me a tad uneasy.
However, not many of us have the luxury of being comfortably able to turn down savings of over $1,000 per year, which is about what you get when you agree to track your driving to save money on your car insurance. In fact, Root Insurance says that drivers who switched from other insurers to their own monitoring insurance system saved an average of $1,187 per year. This article will discuss some of the most important issues to consider before agreeing to be monitored to save money on your car insurance.
What exactly will be monitored?
Typical car insurance rates consider your driving record, as well as demographic data, such as age, location and marital status. Usage-based insurance policies will also consider these factors for a baseline rate, but will also base a portion of your rate on your driving behavior by utilizing telematics technology. These companies monitor your data by gathering it through a plug-in device for your car’s diagnostic port or simply a smartphone app.
Not all usage-based insurance policies will monitor the same things. Some focus on mileage, while others track braking, idling and acceleration. Certain policies might monitor your driving for a specified period of time, while others continuously track your driving. When shopping around for policies, make sure to ask each agent exactly what will be monitored and for how long. Consider whether or not the information is actually a strong indicator of good driving. Some additional questions you will want to ask include the following:
- If the company will share or sell your data.
- How each category of data they collect will affect your insurance rate.
- If you can decline to share the information without incurring a penalty.
Keep in mind that if you do opt to be monitored to save money, this data will only partially affect your insurance rate, according to Janet Ruiz, director of strategic communication for the Insurance Information Institute. Ruiz adds that, “The most important thing consumers can do about their auto insurance is have a good, safe driving record.”
How much have auto insurance rates declined?
Even though insurers are using telematics more and more, insurance rates have actually increased overall, by two to five percent each year between 2012 and 2016. For the best drivers, these rates can and should be lower. Dan Manges, co-founder and CTO of Root Insurance, explains how his company uses higher quality data to ensure the most appropriate rates for drivers. Before offering a quote, Root requires drivers to take an app-based driving test and only accepts those who prove themselves to be good drivers. This test covers a two-week span and tracks the time of day you use your car, whether you use your phone while driving and how abruptly you start or stop your car. This is how some car insurance brokers have saved insurers an average of $1,187 per year.
Other companies have used similar techniques to lower driving rates for their customers.
- Progressive: Progressive has a Snapshot program that gives safe drivers up to 30 percent off their normal rate after a 30-day testing period.
- MetroMile: Although it’s less common, MetroMile offers usage-based insurance (UBI), which allows drivers to pay a combination of a monthly and per-mile rate. Essentially, this means that drivers who drive less get to pay less for their insurance. However, these systems are usually only cost-effective if you are driving far less than the national average of 12,000 miles per year.
- Nationwide: Nationwide’s SmartRide program tracks the amount of miles you drive, hard braking and acceleration, idle time, and night driving. Discounts for this program can reach as high as 40 percent.
Some telematics tools can also provide additional benefits to drivers, including an alert system when your car is experiencing mechanical problems.
What are the privacy concerns revolving monitoring systems?
The savings opportunities might seem very enticing, but consider some of the consequences before pulling the trigger. Jen King, director of consumer privacy for the Center for Internet and Society at Stanford Law School, warns that, “Where you go every day can tell people a lot about what you’re interested in, where you live, who you’re associating with.”
Even in cases where the insurance company vows not to share or sell your data, a data breach could significantly compromise your privacy and security. Ting Zhu, an associate professor of Purdue University’s Krannert School of Management who studies UBI, refers to the 2013 Target data breach, in which a cyber attacker stole the personal data of millions of customers. After this breach, Zhu’s research found that drivers were more likely to drop their usage-based auto insurance. If you have been targeted in the past for identity theft or have concerns surrounding stalking, you will want to carefully weigh this risk against the amount of savings you could receive.
This article has outlined some of the savings opportunities, types of monitoring systems, and privacy concerns regarding auto insurance telematics. Drivers can save over $1,000 per year for being a safe driver, but the question you have to ask yourself is whether or not you think the sacrifice of your privacy is worth it. I hope you will take this advice, carefully consider all insurance options available and make an informed decision about whether or not to pursue these savings opportunities. The decision will ultimately be up to you. However, if you ask the right questions and collect all the information, you can be more confident in your choice.