You may have seen auto insurance commercials touting safe-driver programs. These ads aim to entice you to take advantage of driver discounts made possible if you participate. The program name may vary by company, but the idea is essentially the same: If you can demonstrate safe driving habits, you will earn lower auto insurance premiums. But is this legit? Isn’t this equivalent to spying? Is sharing your driving data worth it? It all depends on your perspective.
First, you may be wondering how it all works. How can the insurance company tell if you are driving safely? The answer is by using telematics. Telematics forms the backbone for what’s called usage-based insurance (UBI). With UBI, insurance companies monitor your driving habits and offer discounts if you can prove you are a safe driver. Telematics employs wireless technology to access and transmit data about your driving behavior to the insurance company. It works similarly to an onboard GPS system in your car, which tracks location data to provide travel guidance.
How UBI safe-driver programs work
When you sign up for the UBI safe-driver program, you agree to use a small telematics device that plugs into a port on your car’s dashboard or download an app on your cellphone. The device or app will track your driving habits for 90 days.
The device or app collects information and calculates a driving score for each trip. Data collected enables the company to measure behaviors that may include speeding, sudden or harsh braking, speed of acceleration, smoothness of cornering, and whether you allow your phone to distract you. The device or app may also monitor the amount of nighttime driving, number of miles per trip, and total miles driven.
The device or app tracks driver behaviors over the 90-day period, resulting in an overall driving score. Those who demonstrate less risky behavior over this time are rewarded with discounted auto insurance rates.
Commercial fleet operators also use telematics to monitor their drivers’ habits, usually with goals to improve efficiency and provide additional training where needed. Using telematics for company vehicles can pay off in both safety and corporate profitability. Fewer accidents result in decreased vehicle damage and product losses, which means fleet insurance rates are more likely to stay stable or even decrease.
Bradish Associates has several insurance providers that offer a telematics feature for both personal and commercial insurance, according to Jordan Bradish, vice president. “While we don’t prescribe this kind of policy, we do recommend it, as a cost saver.”
Will UBI help or hurt over the long term?
In UBI safe-driver programs, drivers receive a discount just for signing up. Younger drivers tend to reap more benefits simply because their rates are usually higher at the outset. A safe-driver program may offer up to a 10% immediate discount for drivers aged 24 and younger, with older drivers receiving an immediate 5% discount.
In addition to the immediate discount for signing up, drivers may be eligible for reduced premiums (ranging from up to 18% to 30% in some programs) when they renew their policy. For many, these programs are worth it for both the immediate and future cost savings.
On the other hand, one reason to consider avoiding a safe-driver program is if you regularly drive at night. Nighttime driving is riskier than daytime driving, so you may not reap as much benefit from the program. Additionally, if you have a long commute or tend to drive long distances, it may not pay to join a safe-driver program. These programs reward those who drive less, not more. More driving is more dangerous.
Saving money vs. giving up privacy
People have been driving a lot less throughout the COVID-19 pandemic, and they anticipate driving less in the near future, as work situations and schedules settle into new patterns. As a result, interest in UBI as a means to save money has increased. A May 2020 report by J.D. Power found that 40 percent of people were considering participating in UBI safe-driver programs to save money.
Another reason for the growing popularity of UBI driver-safety programs is the increasing level of ease people have with tech devices accessing their personal data. As comfort with smartphones and other smart tech increases, so does comfort with UBI. “Utilizing this technology can provide significant premium savings and would be great to use if the customer is comfortable with the idea of installing a monitoring device,” Jordan adds.
But there’s the rub. Some people have a problem with allowing their private information to be “out there,” in the great cloud of data on the Internet. If images of Big Brother tend to pop into your head when you think of telematics, consider this: Your smartphone tracks more data about you and your daily habits than you may ever know. On the other hand, perhaps you want to draw the line somewhere, and you are willing to give up potential benefits (discounts, reduced rates) to preserve more privacy. Everyone has different comfort levels with the idea of monitoring devices.
Rewards vs. costs
Safe-driver programs can result in real benefits for teen drivers and their parents, in both safety and financial terms. Theoretically, using the telematics device will encourage teens to drive more safely — something that parents always want their children to do. Some apps allow parents to monitor the driving scores of their teens, providing peace of mind (or incentive to help teens correct poor driving habits).
Another benefit for parents (who most often pay the car insurance bills) is the opportunity for teens to earn discounted premiums. Younger adult drivers in general are likely to benefit from enrolling in safe-driver programs — but only if they indeed drive more safely. Rates for those aged 16 to 24 are higher than for all other age groups.
Drivers of any age can certainly benefit from UBI safe-driver programs. The objective is to reward safe driving, not penalize drivers for poor driving habits. In most cases any savings earned will be permanent — lasting for the duration of the auto policy.
Companies also stipulate that the device or app will not track where you drive or record other personal information. If you have any concerns, be sure to ask your insurance agent about specific policies before committing to a UBI safe-driver program.
As you weigh your feelings about sharing data on your driving habits, take a look at the overall benefits versus what you may be giving up. Contact your Bradish agent to discuss specific policies and options to save money on your car insurance.
by Kris A. Mainellis