An interesting new concept has been floating around the auto insurance industry that can provide cheaper insurance, but with a catch. You would have to offer up a portion of your privacy. Maybe too much, in fact.
Usage-based insurance is premised on the idea of tracking a driver's history so that consumers can pay for insurance in proportion to their actual, real-time driving usage. While it hasn't gained a lot of traction among insurance companies yet, the idea has promise if drivers are willing to accept the trade off.
How does it work?
The monitoring is done using plug-in telecommunication devices, called telematics, that record numerous features regarding commutes.
"The basic idea of telematic auto insurance is that a driver's behavior is monitored directly while the person drives," states the National Association of Insurance Commissioners. "These telematic devices measure a number of elements of interest to underwriters: miles driven; time of day; where the vehicle is driven; rapid acceleration; hard braking; hard cornering; and airbag deployment."
Rather than use contemporary studies of cohort driving records to determine insurance, telematics would use updated data to better serve customers' needs. Insurance companies would also be able to provide appropriate prices and quotas; meaning higher premiums for riskier drivers, lower premiums for safe drivers.
While both drivers and insurers might see this as a wave of the future. There are distinct drawbacks that have to be taken into account, mainly privacy issues.
Is it worth it?
Would a large population of people willingly give up their everyday driving activity? Ron Leiber of The New York Times thinks it could potentially work but only if everyone is on the same page.
If only a limited amount of people buy in, then rates will be higher. But, if there is enough demand, telematics may become more available.
Drivers could be hurt in the long run as well. While the technology is not able to track exact streets, there is concern that it could happen some time soon. Then, companies will see coordinates of your every location whenever they want.
Your information will be logged into a database that is only accessible by that company. But what if the database is breached?
Not everyone is as careful with personal information as they should be, and there's the possibility a driver's private info could reach the public. Not to mention, once you plug in the device your performance will be tallied on a detailed scorecard. You will then be given an aggregate score that could raise your insurance rates for the rest of your driving days. In the future it could become more difficult to obtain cheap insurance if your score is too low.
While there is still relatively little movement towards a usage-based insurance consensus, the concept can provide insurance companies and drivers a glimpse of what they might expect to see in the near future. Though, many insurers still offer traditional plans that are equally as beneficial to consumers. Safe-driving programs and incentives are now becoming more popular and productive.
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