Allstate Expands Usage-Based Insurance, Plans More Next Year

Allstate recently announced that it is expanding its usage-based insurance (UBI) product, called Drive Wise, into more states this year, with further expansion planned for next year.

The UBI product was already available in Illinois, Ohio and Arizona and expanded to four more states this month: New York, Colorado, Michigan and New Jersey. According to Allstate spokeswoman Laura Strykowski, it will be introduced in three more states this year and more in 2013, but she declined to specify any of the states.

Drive Wise utilizes telematics technology to monitor driving habits including distances driven, how hard drivers brake and accelerate, and when the vehicle is driven. Such records are used to determine rates and eligibility for discounts. Those statistics are gathered by an in-car diagnostic device and posted for the policyholder to track on the Allstate website.

Insurers’ UBI programs base rates on distance driven because more driving equates to higher risk of crashes and accompanying claims. That same logic of driving risk also applies to other characteristics monitored in similar insurance programs.

Rate-determining “driving scores” gathered by UBI devices cannot inflate policyholders’ rates but can net them savings of up to 30 percent, Strykowski said, provided that they drive safely and record little mileage. The average savings is almost 14 percent for each car, according to the insurer.

Industry Seeing Expansion of UBI, Telematics

Drive Wise is expanding amid a highly competitive marketplace where many of the top-rated insurers are going head to head. Progressive’s Snapshot is by far the most widely available UBI program, currently available in more than 40 states.

Competition may get more heated in the future, according to Strykowski.

“Telematics technology and capabilities are expanding rapidly, which may lead to greater adoption in the industry and further capabilities in the future,” Strykowski said in an email. “Also, as consumer comfort levels with this technology grow, the potential for new features will expand.”

Development of technology and interest is driving growth. This summer, Sprint made its wireless network, called Integrated Insurance Solutions, available to all insurers interested in launching their own UBI programs.

Also this summer, Hawaii approved the state’s first UBI program.

Still, there are hurdles facing the market’s growth. Consumers have expressed concerns over privacy issues created by the in-car device used in UBI programs to record driving habits.

In California, where Esurance was approved last month for its pay-as-you-drive (PAYD) program, regulators have not approved any programs that monitor more than mileage due to concerns over privacy and technology.

PAYD programs exclusively tracks miles driven by a motorist, while programs like Snapshot record more types of driving data to determine rates.

California Department of Insurance spokeswoman Pat McConahay said UBI programs have not received the same support from regulators because “there are concerns that insurers might penalize drivers for factors outside of their control.”

About Charles Nguyen
Charles Nguyen is an enterprising journalist who reported for Patch.com and the Desert Dispatch and was the editor in chief of the Guardian (the twice-weekly newspaper at the University of California, San Diego) before coming to Online Auto Insurance News.

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