Ins Policy

For several years now some carriers have offered a device that connects to your vehicle, which gathers data regarding your driving habits. The industry term for this is Usage Based Auto Insurance. In exchange for allowing your insurance company to “ride along with you,” a discount is offered to the insured. The purpose of the device is to sharpen the focus even further on the auto premium. Instead of basing the auto insurance premium only on known factors like age, marital status, garaging address and driving history, it is now possible to measure the number of hard stops, speed or distance traveled.

The wrinkle, as I see it, is that the discount is a percentage of your premium. If your premium is competitive, then the discount is smaller in actual dollars saved, and it would make sense that you are already considered a low risk driver. So naturally, the bigger the premium the better the discount. While this is ideal for those who are charged a large premium simply because of their age, others have earned their large premium with their driving history. The question then is whether the driving history or cases where a citation was issued for speeding or an at-fault accident occurred was a fair representation of his/her overall driving habits or if it was an anomaly. Those who are truly safe drivers will likely see this little device as a welcome opportunity to earn forgiveness for their momentary lapse.