Costs and Benefits of Drive Wise Auto Insurance Program Discussed

Photo of Drive Wise device

(Photo Courtesy of Allstate)

Guests discussing the Allstate auto insurance Drive Wise program on a Southern California public radio talk show were largely supportive of the program, which allows the insurer to monitor policyholders’ driving habits through a device that plugs into a car’s electronic port.

Participation in Drive Wise is voluntary for new and existing Allstate policyholders and can result in premium savings of up to 30 percent for those who show through their data that they are safe drivers. A participant’s level of safety gets judged by when and how far they drive and whether they slam on the brakes or drive at speeds above 80 mph.

Patt Morrison — host of KPCC’s the Patt Morrison Show — asked Allstate spokesman Raleigh Floyd about potential downsides of the program, such as the possibility of drivers being penalized for displaying bad driving habits and the program’s inability to know who is actually doing the driving.

“It is all reward and no punishment,” Floyd said of the program. “The worst-case scenario is you earn no discount.”

As for the insurer’s ability to know who’s driving the Drive Wise insurance program is actually monitoring, Floyd said that at this point Allstate cannot differentiate between drivers and is essentially just pricing the cost of covering the car, not the driver.

“We have to assume that the person signing up is the person in the program,” Floyd said.

The guests also addressed Big Brother concerns associated with the monitoring devices.

Floyd noted that the Drive Wise device has no GPS function and therefore no ability to track where a consumer is driving at any given time. He also pointed out that insurance companies already account to some degree for where a person typically drives by using place of residence as a factor in pricing.

Los Angeles Times columnist David Lazarus called the Big Brother concerns “all just a bunch of hooey,” adding that cell phones routinely transmit much more data about users than the Drive Wise program would.

Guest Frederick Lane, author of “American Privacy: The 400-Year History of Our Most Contested Right,” even commented that, as it stands now, the Drive Wise program has a lot of upsides despite its adding to our data profile.

“The alternative is the honor system, and my car insurer at the moment does exactly that. They ask me for my mileage on an annual basis and that’s a factor in how much my rates are going to be,” Lazarus said. “Whereas this data is indisputable, and that’s the beauty of it — there’s no honor system involved at all. So I think that’s the real plus to this because they’re going to use hard data to determine who are good drivers.”

Lazarus compared it to health insurers’ giving discounts to people who engage in healthier lifestyles, only better because of its ability to base those discounts on actual data.

“It’s going to reward people with demonstrably safer driving habits,” Lazarus said.

Floyd said that the coverage provider looked at and tested the program for three years before launching it in Illinois last month. Allstate has plans to bring the Drive Wise low cost insurance program to more states by the end of 2011.

Morrison asked about the profitability philosophy behind handing out the discounts while not raising rates elsewhere.

“What we’re counting on is that we will attract the safest drivers,” Floyd said. “And by doing so, that will lead to fewer accidents, to fewer injuries, and that will lead to savings.”

About Ben Zitney
Benjamin Zitney has been covering the auto insurance industry for the past 2.5 years. Before coming to Online Auto Insurance News, he produced an extensive company history of the 30-year-old California Joint Powers Insurance Authority and worked at the Cal State Long Beach Daily Forty-Niner as a reporter, copy editor and news editor.

No comments yet.

Comment on this article