Usage Based Auto Insurance / Pay How-You Drive

There are devices in cars now which can be used by law enforcement and insurance companies to determine your driving habits, or your specific driving actions executed at a particular time. These devices, if not installed already in your new car, can be added via a piece of hardware or by a software program, like Progressive's 'SnapShot' device, Liberty Mutual's 'Onboard Advisor', State Farm's 'Drive Safe & Save', and Allstate's 'Drive Wise'. Marketed as Usage Based Insurance (UBI), or 'pay as you drive' insurance (PAYD) and pay how you drive (PHYD) and mile-based auto insurance, this insurance promises to save you money, and save the insurance company risk, by directly monitoring your driving habits and actual usage so that your safe driving habits are more reasonably assessed for a fairer pricing schema than insurance based on past history, marital status, or even worse, your credit history. Monitoring is able to track such driving patterns and habits like 'jackrabbit' starts, fast or hard braking, and speeding. Depending on the device and its software, even where and for how long a driver goes to which locations can be tracked by an insurance company. (Currently, most companies claim not to use GPS to track location or whether or not you are speeding, but the ability seems to be available with the current technology.)

This raises privacy concerns for many drivers, while for many in the 'put your life online' Facebook generation, it may raise none. In fact, many drivers believe they are better drivers than they may be, and so will be eager to possibly save some money by proving that fact with an onboard device which records their habits. If the customer doesn't receive the expected reduction in premiums, insurance companies hope that the drivers may tailor their driving methods to become safer drivers.

Drivers may want to know how an insurance company evaluates the specifics of a person's driving style, before deciding to opt-in to a program initially promoted to save them money. How fast is a jackrabbit start? Does that include a steady but quick acceleration from a stoplight? How many speeding infractions does an insurance company keep track of, or do they just penalize a driver if a traffic stop is initiated and a citation issued? A driving 'reputation' can be created and have financial ramifications so controlling what information is shared, stored, or evaluated can be of vital interest to an insurance customer.

In certain states, the information that can legally be used to assess a driver's insurance rates may be limited by the laws of that state. Public referendums are sometimes used to bypass the legislature and limit insurance companies directly.

To arrive at an insurance rate for a particular driver, companies take into account a myriad of factors. Besides factors directly related to driving like a driving record, miles driven normally, areas in which the car is driven, previous insurance claims, and make and model of the car, insurance companies in California take into account non-driving related factors such as marital status, education level, occupation, home ownership, location of residence, gaps in insurance coverage, credit history, age and sex.

In California, for example, insurance companies lobbied the state to allow electronic tracking devices for usage-based insurance. It was part of "pay as you drive" legislation passed in 2009 that made mileage a major rating factor. With it came new regulations, designed to protect customer privacy, prohibiting insurers from collecting where, when and how a vehicle is driven.  [1]

However, there is a loophole in the law which allows insurers to collect location information, if a system for emergency road service, theft-tracking, or a map service is used in the car.

Much of the other information which insurers can collect from devices like State Farm's In-Drive, or Progressive's SnapShot, is stored and studied. These devices typically plug into a vehicle's on- board diagnostic II port (OBD II) which means the devices have access to all the vehicle's diagnostic information.

Privacy advocates have raised concerns over the usage and possible sales of personal driving and habit information outside of its initial use. Drivers who use a service like On-Star, agree to a much wider data stream analysis of driving information than users of the UBI or 'pay as you drive' plans. But even with just the UBI devices and agreements, laws may change and so a drivers' information, stored now, may be sold or used for another purpose at a later date. In fact, just what information is obtained and stored in the form of data telematics, may be difficult for an insurance customer to understand.

This information, may also be subpoenaed for law enforcement purposes.


1.  Insurance Company Telematics Trade Perks for Privacy - WIRED


For additional information, you might find these articles interesting to read:

This article is of particular interest because it is specifically about California car insurance:

Since its original passage over 20 years ago, Prop. 103 has added over 15 additional rating factors that are not weighted as high as the previous three. In California, car insurance companies can also consider if you're married or not, the location where you live and how many insurance claims are reported in that area, your gender, and the type of car or truck that you drive.