Our family has been lucky. Extraordinarily lucky. Eighty-plus years of mostly city driving, combined across four drivers, and not a single auto insurance claim (note 1). That means we’ve paid more than $100,000 (2013 dollars) in premiums for nothing, so far (note 2).
Actually, that’s not at all fair to the insurance providers. We’ve paid $100k for the peace of mind and potential financial help had we needed it (not to mention staying on the right side of the law). And it's been worth it.
That said, I wouldn’t mind paying less for the same peace of mind. And that’s why I love the idea of mileage- and behavioral-based insurance (note 3). I haven’t always been a model driver, but I was the first person in my extended family to regularly wear a seat belt and I’ve grown to be a relatively conservative driver, especially after becoming a parent.
And I’d love to be compensated for that.
That’s why I’m all for the next generation of “smart auto insurance” that connects to your on-board computers to measure:
- Miles driven per day
- Time of day driven
- How hard turns are taken
- Seat belt usage
- GPS tracking
And eventually, even more difficult concepts such as:
- Driver distraction
- Driver impairment
Not only will I qualify for lower premiums (hopefully), the feedback from the tracker will be interesting (e.g,. historical maps of your routes) and could have a significant impact on the quality of your driving (since it will directly impact your rate). I know there are serious big-brother concerns here, especially in light of the NSA scandals of the past few months. But it can all be opt-in, though eventually, those not opting in will face higher premiums.
Progressive Insurance is an early leader in this area. It's opt-in Snapshot tracking device (inset) has been used by more than one million customers (see screenshot below). Prospective customers can install the device free of charge for 30 days and track their potential savings online. You don't even have to be a Progressive customer to get the free trial.
Bottom line: Unless regulators get in the way due to privacy concerns, it's inevitable that auto insurance, along with other types of property/casualty, will use behavioral metrics to price the risk. That will be a big change for the industry and will likely provide good openings for new entrants.
Progressive has 1 million drivers using its plug-in tracker (7 Aug 2013)
Snapshot tracking log (via RoverGuide.com here)
1. There have been a few altercations with concrete pillars and such, but nothing severe enough to involve the insurance company.
2. I know that I’ve now completely jinxed this, sorry family, and whomever we collide with.
3. See previous post on Street Owl's safe driving app and Metro Mile's pay-as-you-go insurance.
4. For more on banks opportunities in insurance, see our full report here (Dec 2011, subscription)