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Pay-As-You-Drive Car Insurance: Big Savings, No Privacy? Page 2


Pros

Potentially big premium savings – Depending on the auto insurer’s program, how you perform according to its risk-predictive factors, and the discount structure, the biggest draw for signing up for such programs is the opportunity to realize potentially big savings on auto insurance premiums. From a low of one percent (State Farm) to a high of 54 percent (GMAC), there’s no doubt that this could appeal to many drivers looking to lower car insurance costs.

Low-mileage drivers – If you only drive a few miles each day, why not take advantage of a program that rewards such behavior? It’s actually a no-brainer that may be appealing to many American consumers. Let’s say you’re retired and only use your Toyota Camry or Buick LaCrosse occasionally, or you’re a suburban mother driving a Honda Odyssey or Toyota Sienna minivan who only uses her car for brief household errands and to take the kids to/from school, soccer and other activities. Maybe you live in an urban area and take public transportation to and from work and use your Ford Taurus or BMW 3-Series on the weekends. And, if you work from home or telecommute one or more days a week, this kind of a program could also be appealing.

Cons

Privacy concerns There’s no doubt the biggest negative with this program is the potential for auto insurers to get too much into consumers’ personal business. In fact, privacy advocates fear such a reach into our lives could be just the first step. While there’s reportedly no GPS technology in current devices – so the auto insurers say – but who’s to say it won’t be there in the future. Give them an inch and they’ll take a mile, goes the theory of some. Your car insurance companies will not only where you go, but when – and how fast you’re traveling as well. If shades of George Orwell’s Big Brother worry you, this could be a huge red stop sign for signing up to any such low-mileage-discount car insurance program.

Programs may become mandatory – Once such programs start to show some real benefits for reducing incidents of claims, privacy advocates caution that the auto insurance giants will push for them to become mandatory. Of course, such a shift will be cloaked in language touting the benefits of monitoring – and none of the drawbacks. Maybe if you don’t want to be part of such a program, you’ll be forced to switch insurers – if you can find one that doesn’t require such electronic device monitoring. Think such mandatory measures aren’t likely to happen? Would you care to place a bet on it? At least, that’s what some privacy advocates think could happen.

Unfair to long-distance drivers – Another obvious negative is that those of us who regularly drive long commutes or are on the road for the job, let alone whenever the family wants to take a week-end road trip or vacation will be penalized by virtue of the “excessive” mileage we’re putting on the car. Not everyone can take a subway, bus or commuter train, and bicycling just won’t cut it for these types of trips.

Time-of-day penalty – What if you have to leave early in order to avoid massive traffic congestion, and come home late after a long day’s work or on the road? According to time-of-use statistics that auto insurers use for risk-predictive factors, you could wind up falling into a not-so-good category of driving behavior. While the car insurers won’t tell you what they’re specifically looking at in terms of best/worst times to drive, they do say (Allstate, at least) that the safest time to drive is during the day on the weekend. In addition, Allstate says that loss patterns reveal that driving very late at night or very early in the morning can be nearly four to five times as dangerous as driving during daylight hours.

Bottom line: Is the potential savings on car insurance premiums worth what you may be giving up to get it? Here at Family Car Guide, we’d like to hear your thoughts. Feel free to comment below.

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[Progressive, Allstate, GMAC, State Farm]


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Comments (5)
  1. I was enjoying nice savings from Progressive until my wife started driving my car recently. I'm now only at 4% and it may not be worth it anymore... I get 1 hard brake a month maybe and she can rack up 11 in a single trip - sigh...
     
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  2. Good post! As an employee of OnStar, I just want to make mention of the fact that our subscribers who take advantage of these mileage-based insurance programs all opt in to have OnStar report their mileage. We do not do anything with their mileage unless they request it.
    Adam Denison
    OnStar Communications
     
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  3. @JKD - Thanks for your comment. Maybe you can show your wife this article...?
    @Adam Denison -- Great comment about OnStar customer opt-in to the mileage-based insurance programs. OnStar is very diligent about protecting customer privacy.
     
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  4. As much as this might benefit someone, it should not be forced on everybody. Insurance companies already have too much power. I would never advocate giving them more. They may claim that it is for our benefit, but really it's nothing more than opening a Pandora's box of problems that will hurt everyone.
     
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  5. @Daniel Chavez Moran - Many would agree with your sentiments. Thanks for your thoughts.
     
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