Should the Insurance Company Be Allowed to Track Your Driving?
Auto insurance companies are increasingly offering “usage-based insurance” rates that rely on cellular or GPS devices to track your driving. These rates may offer significant discounts over what your traditional auto insurance might offer, but there are trade-offs. Here’s what you need to know to decide if usage-based insurance is right for you.
What is usage-based insurance?
Usage Based Insurance – 0r UBI – uses devices known as telematics, which are usually a mobile app or gadget connected to your car’s dashboard. These devices collect and transmit data about your driving behavior, including your vehicle’s location, speed, distance, hard braking, seat belt use, fuel consumption, battery voltage, and engine data. Some UBI programs use telematics for several months, while others run continuously.
Telematics data is different from traditional auto insurance, which rates are based on factors such as your age, gender, marital status, vehicle type, garage location, liabilities and retentions, and your driving experience and insurance credit score. UBI also uses this data, but telematic data allows additional discounts depending on how well you drive.
Types of UBI plans
There are generally two types of UBI plans: Pay-as-you-drive (PAYD) plans and Pay-as-you-drive (PHYD) plans. Paid tracks your vehicle usage and rewards people who drive less, while PHYD rewards as you drive monitoring risky behaviors such as speeding or slamming on breaks. Savings can vary from 5% to 40% depending on the type of driver.
pros
- UBI rewards good driving with a lower rate.
- The tracking device reduces the number of vehicle theft reports.
- Tracking improves driving behavior.
- For businesses, tracking discourages vehicle misuse.
- You can get discounts upon registration.
Minuses
- The most obvious is confidentiality, transfer of your data to the insurance company.
- Setting up tracking can be a daunting task.
- If you’re not really a good driver, your premiums may go up, not go down.
- Your driving data can be used against you in court.
Confidentiality is definitely a trade-off. With UBI, you reveal your habits: the places you want to go, where you live and who you hang out with. Some programs even require your telematics device to be on at all times.
While UBI carriers say they will not share driver information with third parties, insurance companies will be required to share data to assist in criminal prosecutions if required by law. Data breaches are another potential security issue.
Bottom line
If you’re a very safe driver who doesn’t worry too much about privacy, UBI will save you money. However, if you are not the best driver or are worried about data transfer and the potential pitfalls associated with it, ditch telematics and stick to traditional insurance.