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Pay-As-You-Drive Car Insurance: Big Savings, No Privacy?

2011 Toyota Camry LE

2011 Toyota Camry LE

Why should good drivers have to pay to subsidize the bad driving behavior of the other guys?

Surveys show that most Americans – 95 percent – believe they are good drivers. So that really bad driving behavior is from the five percent out there. Why not shave off up to 30 percent in car insurance premiums by participating in a program that monitors how much, how far, and how we drive?

Oh, really? Does this strike you as too much intrusion into your personal affairs? Or not? Here’s a look at what a number of insurance companies are offering right now. We’ll lay out the programs (briefly) first and then go into some of the pros and cons.

Progressive Insurance – “Snapshot”

Who doesn’t recognize Flo from the TV commercials of auto insurance giant Progressive? After doing a program called “MyRate” for more than a year, Progressive has evolved its electronic monitoring device program – a type of usage-based auto insurance – into “Snapshot,” promising discounts as high as 30 percent for drivers who, basically, drive less, drive during “safe” hours, and don’t brake hard too often. In the Snapshot program, an electronic device is installed on the car’s auto port (standard on all cars manufactured after 1996). The device monitors the number of miles driven, time of day the vehicle is on the road, and the number of times the driver hits the brakes hard. It also records when the device is connected and disconnected and the car’s vehicle identification number (VIN).

Currently the Snapshot program is available in 30 states and has more than 100,000 customer vehicles enrolled. Enrollment is free. Progressive says there is no GPS technology in the device, so it doesn’t track where drivers are going or whether they’re exceeding the speed limit. The company says it won’t drop customers who drive more and consumers can track their results online.

Allstate – “Drive Wise”

Allstate’s “Drive Wise” program allows safe drivers (and low-mileage drivers) to “demonstrate their lower risk driving on a daily basis, and earn significant savings by doing so,” according to the company’s website. In fact, customers earn an automatic 10 percent discount just by signing up for the Drive Wise program. Like Progressive’s Snapshot program, Allstate’s Drive Wise program involves installation of an electronic device that tracks mileage and number of times of hard braking. In this program, however, the electronic device notes anytime the driver’s speed exceeds 80 miles per hour. Although speed is being tracked, the insurer says acceleration isn’t being counted right now. That’s because, the insurer says, they’re still evaluating the “risk-predictive factor of such events.”

There is a small fee of $10 per six months policy period per vehicle enrolled, but there is no other enrollment or monthly fee. Consumers can track their results online. Currently, Drive Wise is available in Illinois, but Allstate plans to expand it to other states as early as Q2 2011.

GMAC – “Low Mileage Discount Plan”

The idea of paying only for what you need and nothing more certainly sounds enticing – and that’s what GMAC’s “Low Mileage Discount Plan” touts. Exclusively for OnStar subscribers, the GMAC program is currently available in 35 states to owners of GM cars with OnStar vehicle diagnostics and who drive less than 15,000 miles a year. In the GMAC program, OnStar reports actual miles driven. If customers drive more than 15,000 miles per year, there’s no penalty and the amount of the discount received depends on how much less than 15,000 miles the customer drives annually.

GMAC says that customers who sign up for Low Mileage Discount could save up to 54 percent. And there’s already a discount for active OnStar subscription (20 percent on comprehensive coverage and 10 percent on bodily injury and property damage coverages). GMAC says it already has 30,000 customers enrolled in the Low Mileage Discount program.

State Farm – “Drive Safe & Save”

Like the GMAC program, State Farm’s “Drive Safe & Save” utilizes OnStar to report odometer readings. Therefore, the program is only available to drivers who own vehicles with active OnStar subscriptions. There must be at least 100 days of odometer readings before a discount is applied. At that time, the Drive Safe & Save factor will be analyzed based on annualized mileage. The company says savings range from one percent to 45 percent.

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