Auto insurance companies would really like to know how well you drive on a daily basis. Usage-based insurance (UBI) products let them monitor your driving in exchange for offering you potentially lower rates. The tracking devices typically used for UBI policies tell them when you go out, how far you drive, how much and how hard you brake, and how rapidly you accelerate. If you agree to use such devices, you could be eligible for discounts of up to 30 percent on your car insurance rates. Currently, about 1 percent of drivers benefit from some form of UBI, says Bob Mathe, president of Evogi, which designs and engineers telematics solutions for insurers. In five years, that number could be as high as 20 percent, predicts Mathe. By 2020, it could be as high as 30 percent. In fact, insurers that have just begun thinking about telematics-based pricing are way behind, says Mark Hill, senior manager of Deloitte Consulting. Not only are they behind, but they also run the risk of losing their customers to early adopters that are rewarding their policyholders for safe driving, says, Stephen Packard, director of Deloitte Consulting.
Drivers willingly participateDrivers don't seem to mind giving up their personal information as much as you might expect. "Many consumers feel the discounts more than offset the loss of privacy," Packard says. In recent surveys, Towers Watson, global professional services company, found that more than 80 percent of drivers are willing to install tracking devices for the benefit of a discount, says director Robin Harbage. It could be that in today's world, people are used to relinquishing their privacy, Mathe says. Many smartphones today gather and store all of the same information kept by telematics devices installed in a car, he says. Between Facebook and location-based social apps like FourSquare, "more and more people are sharing their intimate information all the time," Harbage says. And they think nothing of it.
No device, no insurance?Could there come a day when auto insurers require you to have a telematics tracking device in your car?
Yes and no, Mathe says. Someday all insurance companies will require actual verified mileage to price car insurance, he predicts. However, he adds, "I don't believe even though the information is available from your car [that] you ever will be required to share the specifics of your personal location to get insurance."But your car insurance company may wonder why you are unwilling to let them see how you drive, Packard says. And there will always be some drivers who refuse - but they may end up paying higher premiums for their refusal to be tracked.