Usage Based Insurance Indicates Lower Car Insurance Rates in the Future, Announces The Internets Largest Online Car Insurance Website.

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Usage based insurance indicates lower rates in the future, announces the Internets largest online car insurance website.

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Usage Based Car Insurance

The advent of telematics technology has given rise to what may be the next generation of auto insurance practices. Usage based insurance (UBI) involves the use of a tracking device being placed into a consumer’s car. The device transmits data to the insurance company about the consumer’s driving habits. The data is then used to calculate insurance costs and to potentially lower the consumer’s overall costs.

Concerns noted by some are primarily focused around the issue of privacy. The telematics device utilized for usage based car insurance transmits data regarding how fast the driver typically goes, how quickly the driver accelerates, and how often, and how hard the driver brakes. They also generally transmit when the consumer goes out. It seems reasonable that some might question their whereabouts being transmitted, feeling that their privacy was being violated.

Perhaps surprisingly, though, surveys conducted by Towers Watson seemed to suggest that these concerns can be laid to rest. More than 80 percent of consumers polled stated that they would be willing to install such a device in their car, if it actually lowered car insurance rates.

The data transmitted for UBI allows the insurance providers to asses more accurately the risk factors of ensuring a particular driver. This in turn allows them to adjust the cost of insurance for that driver. In other words, if the driver consistently drives safely, they can be offered a discounted rate or other incentive as a reward. Consumers today are highly concerned about saving money wherever possible and a company that offers usage based insurance programs is going to catch the eye of these individuals.

According to Bob Mathe, president of Evogi (a company that engineers telematics for insurance companies), around 1 percent of consumers are utilizing UBI in some way. Mathe predicts that the number could rise to as much as 20 percent in the next five years and possibly even reach 30 percent by the year 2020.

Mark Hill, senior manager of Deloitte Consulting, suggests that companies that have only just begun thinking about offering UBI are way behind. Stephen Packard, director of Deloitte Consulting, agrees and takes it a little further, suggesting that car insurance companies that do not embrace this new technology and begin offering it to consumers are eventually going to lose their client base.

Several American insurance companies already offer usage based insurance programs in certain states. Allstate, for example, has a usage based insurance program called “Drive Wise” that is available in three states. Esurance just launched their usage based insurance in Texas. GMAC was one of the first companies to introduce UBI to consumers and their program is now available in 35 states around the country. Progressive’s “pay-as-you-go” discount program is another example of UBI being put to good use. Their usage based insurance program, Snapshot, is available in almost every state in the country, with a few exceptions.

Usage based car insurance has sparked consumer’s interest and it isn’t very difficult to see why. As the technology develops and more and more insurance companies join the parade, consumers will likely see insurance policies and procedures change. As telematics become more sophisticated and better utilized, the insurance industry evolves and usage based insurance may become commonplace.

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Rudi Gevorgyan
NetWealth, LLC
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Clint Dixon
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