Car Insurers Promote In-Car Tracking

by Don Elliott on September 7, 2011

GMAC Insurance was one of the first major car insurers to offer “pay-as-you-drive” discounts in 2004. Using GM’s OnStar system, they were able to track the mileage driven and offer up to 26% discounts for low mileage drivers.

While it was state of the art at the time, the car insurance industry is moving forward to base rates on more than the typical age, gender, address, driver’s license points, and other factors. The logic is simple. The lower the risk for a payout, the lower the premium payment. Okay so far, right?

There is a trade-off between the information that you willingly share with the car insurance company to get better rates and invasion of privacy. If the incentive is great enough, more and more people will allow in-car tracking devices to be installed in their cars.

In fact, all cars built since 1996 have an OnBoard Diagnostic (OBD-II) port that collects data on the operation of the car in a device that is similar to the “black box” carried on airplanes. Car insurers use a wireless device about the size of a cell phone to transmit information from the OBD-II module regarding the way you drive, how fast you go, how hard you use the brakes, when you drive, and how you handle left and right turns. For example, go over 80 MPH and you can kiss your discount goodbye.

Progressive Insurance requires that they monitor your driving habits for up to 6 months before you are eligible for their “Snapshot” discount. State Farm’s “Drive Safe and Save with In-Drive” program requires that their device stay on the car as long as the discount is to apply.

Pros:

  • Lower rates because of lower risk
  • Better assignment of insurance liability to the proper driver
  • Options for the insured driver—drive safer and pay less
  • Monitored drivers tend to be better drivers, particularly if they are newer drivers
  • The programs are voluntary and can be shut off at anytime (and of course the discount also ends)

Cons:

  • Invasion of privacy. Who, besides the car insurer, will have access to your driving habits?
  • Liability for the drivers who may be involved in an accident. Their data may provide proof of fault against them
  • Some systems include a GPS device, that would record information about where the car has been at all times
  • The in-car tracking device records the car, not the driver. Multiple drivers may upset the insured driver’s driving history towards a discount.
  • The financial incentive may cause some drivers to compromise their personal integrity concerning privacy.

Right now, in-car tracking is a voluntary program. However, electronic tracking devices of all kinds are becoming more prevalent.  Red light cameras, toll trackers, speed monitors, and even personal GPS units record data that can be used without your permission. At what point will in-car tracking for car insurance discounts be a financially acceptable option for you?

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