Survey Shows Mixed Views of Data-Driven Auto Insurance Rates

According to a recent poll from LexisNexis Risk Solutions, just over half of respondents believe that car insurance rates should be determined by actual driving data collected through the use of on-board telematics devices.

Every auto insurance coverage provider looks at a prospective policyholder’s accident and ticket history to help set rates. But privacy concerns are holding back some consumers from allowing companies to collect speed, mileage and braking data directly through devices that plug into their vehicles’ electronic port.

Handheld OnStar device

Credit: ©GM

The voluntary use of devices that transmit driving data to insurers is becoming increasingly prevalent.

GMAC has for some time been collecting driving data through the OnStar devices on some vehicles. Progressive has since 2008 been offering discount opportunities for policyholders who participate in their SnapShot program, which monitors information about speed, braking, distance and the times of day that a policyholder travels. And Allstate announced in December that it would be launching a similar program, called Drive Wise.

Even though allowing insurers to collect driving data was opposed by 43 percent of the survey’s nearly 3,500 respondents, 80 percent felt that tailgating should affect rates, and 59 percent believe that annual miles traveled should also have an effect.

In fact, insurers in most states are already allowed to incorporate annual miles traveled into rate calculations. But most rely only on estimates from policyholders.

And because of the potential inaccuracy of these estimates, the mileage-based rating tiers are usually large. Data verification could allow for more precise pricing.

One example of this is the verified mileage program recently approved for State Farm for its California policies. State Farm policyholders who provide only estimates of their mileage are put into either the 0-7,500 miles category or the 7,501-and-over category.

But those in the mileage verification program are rated through smaller increments. Those policyholders are placed into categories cut up into 500-mile tiers that go up to the 19,000-mile mark.

Whether or not drivers ultimately take advantage of the programs, the opportunities for drivers to participate in data-driven insurance rating plans should be increasing in the coming years. According to LexisNexis, “84 percent of all cars shipped [worldwide] by 2016 will incorporate telematics systems, up 19 percent from 2008.”

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.

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