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As drivers struggle with high gasoline prices, some auto insurance companies are offering lower rates to customers – in exchange for information about their driving habits.
Wide adoption of usage-based insurance pricing would mean an estimated two-thirds of households would pay less in premiums than they do now, according to a report by the Hamilton Project at the Brookings Institution, a think tank.
Researchers Jason Bordoff and Pascal Noel calculated average savings at $270 per car per year. Some analysts and insurers believe that after a slow start, usage-based insurance could take off now that higher gas prices are forcing consumers to drive less anyway.
GMAC Insurance Group offers a low-mileage discount program in 34 states, including Indiana, offering discounts up to 54 percent to customers who drive less than 15,000 miles annually. To be eligible for the program, customers must have the OnStar security and diagnostic system in their cars.
New customers receive a 26 percent initial discount for enrolling in the low-mileage program. OnStar odometer readings allow GMAC Insurance to verify the mileage driven. After the first six months, drivers who renew their coverage can earn discounts from 13 percent to 54 percent, based on how many miles they drove.
Policyholders who drive more than 15,000 miles a year don’t pay higher premiums at renewal, they just aren’t eligible for the low-mileage discount, a GMAC spokeswoman said.
“We feel it’s extremely relevant to our customers right now, given escalating fuel costs,” said John O’Donnell, vice president of business development for St. Louis-based GMAC Insurance.
Odometer readings are the only information GMAC Insurance gets from OnStar.
Customers who drive less also cost the company less.
“What we’ve found from our initial results is people who drive fewer miles tend to have fewer claims,” O’Donnell said.
GMAC isn’t the only insurance company offering innovative options.
This month, Progressive began offering MyRate. The program monitors not only how many miles customers drive, but also when they drive and how they brake and accelerate.
Unlike GMAC’s discount plan, MyRate customers might see their premiums increase or decrease based on their driving behavior, said Richard Hutchinson, a general manager at Progressive.
Progressive gathers driver information using a small wireless device under the steering column, Hutchinson said. There is no GPS tracking on the Progressive device, Hutchinson said.
Currently, Progressive Corp. offers MyRate in four states and hopes to offer the program in nine states by the end of the year. Hutchinson expects the program will come to Indiana during its proposed national rollout next year.
Progressive isn’t the only insurance company keeping tabs on drivers.
American Family Insurance began offering a monitoring system for new drivers called the Teen Safe Driver program in Indiana in March 2007, but the information is not used to set insurance rates.
Customers who sign up for the program will have an in-vehicle video and audio device installed behind the rearview mirror. One camera faces the driver and the other faces the road. When a risky event occurs, such as swerving or hard braking, the cameras record for a total of 20 seconds: before, during and after the event.
The event is transferred wirelessly to DriveCam’s analysis center, where the clip is reviewed and scored, and coaching tips are added. Parents and teens can log on to DriveCam’s Web site to view the video and driving advice offered. Parents also receive a weekly driver report card that shows their teen’s performance compared with other teenagers’.
American Family receives aggregate information about driving behavior for the customers in the program, however. That information has shown that risky driving behavior has decreased 70 percent for those in the program.
kpeterson@jg.netThe Wall Street Journal contributed to this story.
