If you’re a good driver, you’re probably paying too much for your auto insurance. With the traditional insurance model, your premiums have little to do with how you drive -- until an accident or a speeding ticket results in a fat rate increase. Rates are usually based on statistical averages: Your gender, age, marital status, where you live and what you drive determine what you’re charged. If you’ve been accident-free for a long time or don’t drive much, you may get a discount, but personalizing your premiums may save a lot more. A Brookings Institution study suggests that two-thirds of households would pay less with a pay-as-you-drive policy, reducing annual premiums by about 28%.
Robert Hunter, director of insurance for the Consumer Federation of America, says that user-based insurance has been talked about for decades, but until recently there was no easy way to monitor things such as mileage. Now technology lets you get a break on insurance premiums based on how you actually drive.
How’s my driving? Progressive offers its user-based insurance, called Snapshot, in 37 states. I gave the Snapshot tool a test-drive to see how much I could save on premiums. Here’s how it works: You plug a palm-size tool into the diagnostic port in your car (all cars made after 1996 have one), and it pulls data from the car’s computer and sends it to the company via a cellular network. The tool tracks the time of day you drive, your mileage, and your acceleration and braking rates. After 30 days, you may earn an initial discount; after six months, you send the tool back and become eligible for a permanent discount of up to 30%. Because I rarely drive my own car (I’m usually test-driving new vehicles), my results showed I would qualify for 30% off with Snapshot, but the average discount is 10% to 15%. There’s no cost to enroll, and Progressive cannot raise your rates based on the data collected.
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Allstate has a similar program, called Drive Wise, currently available in Arizona, Illinois and Ohio. The tool collects the same data as Progressive’s tool does, plus the number of times you exceed 80 miles per hour. You get a 10% discount at sign-up, which is replaced by a discount of up to 30% after your first policy period. It costs $10 per period to participate, and you need to keep the tool in the car to keep earning discounts -- each is applied to your policy renewal. Neither Progressive nor Allstate includes GPS in its tool, so your whereabouts are your business.
By the mile. General Motors’ OnStar system is the basis for two programs that offer discounts to low-mileage drivers. OnStar is free for the first year for new GM vehicles (three months for used vehicles), and subscriptions cost $19 to $29 per month after that, depending on service options.
GMAC Insurance offers customers in 35 states an 8% average discount just for having an active OnStar subscription. If you enroll in the free OnStar Vehicle Diagnostics service and drive fewer than 15,000 miles a year, you can get a discount of at least 13%; that can go as high as 54% if you drive less than 2,500 miles per year. If you’re a new subscriber, you’ll get 13% off until enough odometer readings are gathered to calculate annual mileage.
State Farm’s Drive Safe & Save program -- available in California, Colorado, Illinois, Ohio and Texas—uses OnStar as well. You get a discount for signing up (typically about 5%), and after 30 days you can earn up to 44% off based on your odometer readings. The discount is recalculated with each policy renewal.
If you live in Texas, MileMeter lets you buy insurance by the mile (prices start at about 2.5 cents per mile). Just send in a photo of your odometer when you sign up and at renewal time.
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