Not all drivers pay the same amount of car insurance because everyone has their own driving patterns of distance and behavior. Some people commute to work every day and have higher auto insurance costs because of it, while others who stay home most of the time or use alternative transportation can potentially pay much less. Here's how usage-based car insurance can help cut your monthly insurance costs.
The science of telematics is at the core of how usage-based auto insurance works. Telematics involves the use of IoT devices installed in vehicles to track mileage and driving behavior. It provides driving metrics such as speed, acceleration, and braking. These actions are time-stamped, keeping a digital log of your journeys. If the data proves you're a safe driver who limits driving mileage, it can lower your insurance costs.
According to a TransUnion study, auto insurance rates drop for nearly half of the drivers who sign up for a telematics program. Telematics can be set up in different ways, as some of these systems are already built into the vehicle.
For cars that aren't equipped with a telematics device, insurers can install a telematics plug-in to the vehicle's onboard diagnostics port. The data can also be collected through a smartphone app or a device that attaches to your windshield and communicates via Bluetooth.
Usage-based insurance is becoming more common, but it's still not offered in every state. If your state allows for such a program, it's important to review all the policy details before signing so that you know which driving behaviors are measured. It's important to know, for example, if it tracks holding your smartphone while driving.
Some people worry that the use of telematics in which data is reported directly to insurance companies invades privacy. But if you've got nothing to hide and genuinely don't drive much, usage-based car insurance definitely is worth it.
Many drivers are concerned about how insurance companies will use data that comes from telematics devices. About a third of the respondents in Arity's 2021 Telematics Consumer Survey mentioned this was their top concern. Arity is the telematics partner for Allstate Insurance. About the same percentage of drivers were concerned about data accuracy. Another third was concerned if the results could increase their insurance rates.
Drivers can save money on insurance via telematics, according to the Consumer Federation of America (CFA). The technology, however, still needs refinements. The CFA also warns how the lack of rules regarding pricing transparency and consumer privacy can be problematic.
So it has recommended a list of actions that state regulators should take to protect consumers. A major item on this list requires insurers to get permission from consumers to use their data. Another recommendation is to prevent insurers from selling this data or to make such selling transparent to the customer.
User-based car insurance can be a solution for lowering your monthly car insurance costs. It's important to know exactly what type of driving behaviors your insurer electronically tracks. Contact us today at CF&P Insurance Brokers for more information on telematics and cutting insurance costs based on how much and how safely you drive.