Car insurers tout savings up to 30 or even 50 percent if drivers stick a gizmo in the car that tracks driving habits, but company disclosures show it can raise premiums in some cases, and an auto executive’s remarks have stirred unease about what companies monitor and what they do with the data.
Whether the gadget becomes a new pal bragging about your exemplary driving, or a tiny turncoat dropping a digital dime on you, can depend on things many drivers don’t realize insurers watch, surveys show. Example: Driving after midnight if you work the night shift or try to beat the crowds at the 24-hour grocery. Or letting your speed creep up past 80 mph on the freeway, even if you never have an accident or get a ticket.
The queasier implications were highlighted by a Ford executive who remarked at a conference this year, “we know everyone who breaks the law” by speeding, thanks to GPS devices. Jim Farley, Ford’s global vice president of marketing and sales, quickly assured drivers that the car company is not supplying that data to others and doesn’t track it without a driver’s consent.
Still, his comments point to a whiff of wariness around the still-evolving relationship between such technology and insurance. Less than 1 percent of drivers overall might be using the gadgets for insurance purposes right now, analysts estimate, but it’s a growing trend.
More than 1.5 million customers have tried Progressive’s Snapshot program and a third of new customers who contact the company directly are choosing it, the company says. Allstate says a similar proportion of new customers nationally and in Florida are asking about its Drivewise option. Such programs often feature devices that plug into the car, such as in a diagnostic port below the steering column.
“The positive is certainly there are opportunities to save money,” said Laura Adams, senior analyst for insuranceQuotes.com, a unit of bankrate.com of North Palm Beach. “The negative is yes, there is some privacy you’re giving up.”
Most people understand that the devices track how many miles you drive. But about 41 percent don’t know they can track your speed, 58 percent don’t realize they commonly track when you drive and 63 percent don’t know they typically monitor how hard you brake, according to a survey conducted by Princeton Survey Research Associates for insuranceQuotes.com.
Not everyone trying the program qualifies for discounts — about a third do not at Progressive, a company official said. Those who do save on bills average closer to 1o percent or 15 percent rather than 30 percent or 50 percent, responses from Progressive, Allstate and State Farm indicate.
Also important is the starting line from which “savings” are measured. Insurers typically pitch the devices as voluntary and something that can only lower your rates, not raise them, and the worst consequence is you just don’t qualify for discounts. But a spin through company disclosures shows some programs can raise premiums because of the data the on-board technology collects.
Take State Farm’s Drive and Save program, where premium savings are advertised up to 50 percent. In Florida it is available for drivers with OnStar, In-Drive and Sync. A company webpage notes “if you are currently receiving a discount for low estimated annual mileage (under 7,500 miles annually for personal use) and your vehicle is actually driven more than that threshold, your premium may increase at a future renewal.”
A spokeswoman said that overall the program “enables State Farm to better match price to risk and offer competitive pricing to current and potential customers.”
In all this, consumers and insurers can have different ideas about what constitutes good driving — or what’s bad when it comes to discounts. Driving between midnight and 4 or 5 a.m. is a common reason for insurers to deny discounts, on the grounds that accidents are more likely then, even if you think it’s a great time to drive to grandma’s when traffic thins and the kids sleep.
Policyholders might not think of hard braking as necessarily a problem if the driver stays out of actual accidents. Yet it can be one of the top reasons for insurance companies to deny discounts, on the reasoning that drivers braking hard may tend to follow too closely, travel too fast or not pay sufficient attention.
Car insurers who have pioneered the idea say it tends to attract drivers who don’t mind being tracked and, more often than not, such folks come out ahead financially.
Devices are popular
“More than a third of our new shoppers in the direct channel are signing up,” said Dave Pratt, general manager of usage based insurance for Progressive Insurance.
Nationally, more than 1.5 million customers have signed up since 2008, he said. Progressive began advertising its Snapshot program about three years ago, promoting discounts up to 30 percent.
About two-thirds of those who sign up for Snapshot get discounts, he said. Average discounts range between 10 percent to 15 percent, Pratt said.
He said Progressive does not penalize drivers for speeding, though its device records the vehicle’s speed at one-second intervals. That meant the company knew about, for instance, a driver who took his Mustang up to 157 mph. That driver’s rates were not affected, he said.
“Today’s policy is for the rate not to go up,” Pratt said. “I don’t know if that will always be true.”
If the policy changed, he said, “we would tell people up front before they signed up.”
There’s an optional beep that sounds when the driver has a hard brake, according to the company. Some drivers like the reminder and say it helps promote safer driving, Pratt said.
Other insurers say high speeds can affect rates. Allstate says it tracks speeds above 80 mph in its Drivewise program.
“We calculate a risk factor based on the percentage of miles that your vehicle logs at speeds at or above 80 mph,” a company ebook says. “We chose 80 mph as the threshold based on our risk models, which suggest that accidents are significantly more likely and more damaging at these speeds.”
Allstate says its Drivewise device offers discounts up to 30 percent for being a low-mileage driver, driving at safe speeds, safe hours, and avoiding hard stops.
The company says Drivewise will not increase a driver’s rates, but then provides examples of how the bill could go up: “Remember, your overall premium may increase from renewal to renewal due to other factors—and you earn an Enrollment Discount only once. Therefore, you may see an increase in your premium if your Performance Rating doesn’t earn you a discount or your Performance Rating Discount is lower than the Enrollment Discount.”
Focus on privacy
Another potential concern — privacy — has accounted for some of the stir over the Ford executive’s remarks.
A Ford spokesman clarified that imbedded navigations systems in 2013 and 2014 models store latitude, longitude and time stamps on board the vehicle in a temporary buffer. That data is stored approximately two to three weeks, but location data in not transmitted off board, the spokesman said. Various optional connected services require consumer consent before transmitting location data, Ford says.
At insurance companies, privacy policies can vary, but many say they don’t share an individual driver’s data to third parties, though they might share aggregate data with, say, car manufacturers to see how much time drivers spend idling.
An Allstate spokeswoman said, “We inform customers via the Drivewise Program Customer Agreement that if the data is of interest in an accident investigation, it is discoverable and potentially usable by law enforcement authorities, insurance companies or in a court of law. We do not use the data in claim handling.”
But as the devices become more common, won’t insurers increasingly grow tempted to charge more for customers they think are speeding or engaging in other driving behavior that makes actuaries frown? Won’t they want to drop customers they consider more likely to get into accidents?
Stay tuned. And read the fine print.
If Allstate ever changes change Drivewise “to allow for additional cost for poor driving performance, we’ll let you know in advance,” the company’s ebook says.
What are insurers tracking?
To take one example, drivers who agree to install a Snapshot device from Progressive Insurance can expect these driving habits to affect potential savings, the company says:
- How often you put on the brakes hard
- How many miles you drive each day
- How often you drive between midnight and 4 a.m.