Don’t let other drivers raise your insurance rates!
With Usage-Based Insurance, you can get a safe driving discount based on your own good driving habits.
Nearly all of the insurance giants have some form of safe driving discount. In the past, your safe driving skills were usually determined by your driving record: fewer tickets and claims translated to bigger savings.
But what about those maniacs that speed through traffic, but somehow never get caught by the police? Or the ones who simply drive around with their busted car and never bother to file a claim? It’s not fair that they should be getting a safe driving discount (and raising your rates in the process).
Enter: Usage-Based Insurance.
Whether you’ve heard it referred to as UBI, telematics, Pay-as-you-Drive Insurance, or simply a “safe driving discount,” Usage-Based Insurance is a much more accurate way to determine your safety as a driver because it looks at the only thing that matters: your own unique driving habits.
In this article, we’ll talk about what UBI is, what it measures, how much of a discount you can expect, and how to decide if it’s the right product for you.
What Is Usage-Based Insurance?
Usage-based insurance (UBI), also known as telematics, calculates your car insurance premiums based on your driving habits (i.e. your usage).
Upon enrollment in the program, you will either plug a device into your car or (more commonly) download an app on your smart phone. Some insurers still use a telematics device that plugs into your car’s USB port, but most are making the switch to a smartphone app.
The device/app monitors when, how, and how often you drive and this data is used to determine your rates.
Usually, after a trial period of 90-180 days, users can receive generous discounts on their car insurance. Of course, the better your driving “score,” the better the discount.
Many of the auto insurance carriers we work with offer some form of Usage-Based Insurance:
If you are currently with one of these companies, call us so we can go over the specifics of their program. We are ready to get you signed up today!
What Does UBI Measure?
Not all Usage-Based Insurance programs are created equal. Each carrier uses different metrics to calculate rates, so their apps collect different sorts of data.
Overall, however, those safe driving apps are collecting information on three things:
1. How Far You Drive
One of the biggest factors in determining your safe driving discount is how many miles you drive.
According to your insurance company, the more you are on the road, the more likely you are to file a claim for damage or loss. If you drive less, collisions, theft, and other claims are much less likely.
If you overestimated your annual mileage when you purchased the policy, you could expect to see a discount through Usage-Based Insurance.
2. When You Drive
Another thing many insurance companies look at is when you’re driving.
In general, you’re likely to get a good “score” if you’re avoiding rush hour and late night trips. If you are a retiree, student, or stay-at-home parent who mostly drives in the middle of the day, this can have a good impact on your discount.
3. How Safely You Drive
Finally, Usage-Based Insurance looks at how safely you drive.
This is where insurance companies tend to differ the most, but some factors that may come into consideration are:
- Sudden acceleration and/or braking
- Taking tight corners
- Long periods of idling
- Cell phone usage while driving
Again, the key word here is “may.” For example, Progressive’s Snapshot program looks at idling and cell phone usage, but Travelers’ IntelliDrive app only looks at speed, braking, acceleration, and time of day.
Does This Mean Big Brother Is Watching Me?
For some, the idea of “Big Brother” watching their every move is a good reason not to participate in Usage-Based Insurance.
Tracking us through our phones seems mighty personal. After all, passwords or facial recognition are required to access them. Surely, our phones are private devices, aren’t they?
The answer is a resounding NO!
Whether it’s applications we’ve downloaded or embedded software, our phones are CONSTANTLY transmitting our private data to our service providers, third-party application vendors, phone manufacturers, and others.
In fact, the ability to track you is part of what makes smartphones so gosh darn convenient.
Google Maps works so well because it can use your location and speed to give you an accurate estimate for when you will arrive at your destination.
The truth is that your smartphone is anything BUT a private device, and resisting things like Usage-Based Insurance and safe driving apps doesn’t make much sense if you’re already a smartphone user.
Besides, who wouldn’t want that 30% safe driving discount?
If you have question about the type of data being collected and what it is used for, you can always ask your independent insurance agent.
How Much Is the Discount?
Usage-Based Insurance programs don’t cost anything to use and—in most cases—can only improve your rates.
Many companies offer a 5% discount just for signing up; once they have collected enough information, your premium may be reduced by as much as 30%, depending on your insurance carrier and your driving habits.
For most companies, your rate will either stay the same or go down, so you have nothing to lose! Only a small number of insurance companies may raise your rate if your driving appears to be “unsafe,” but they are in the minority.
Is It Right For You?
Usage-Based Insurance is a voluntary program, meaning that you must “opt in” to participate. This gives you the freedom to decide for yourself if telematics makes the most sense for you.
Before you sign up for Usage-Based Insurance, answer these questions.
- Will your driving habits earn a discount? This is sometimes referred to as a “safe driving discount” for a reason. You have to drive safely in order to get the discount! Be honest with yourself about whether or not your driving habits will earn you a good score.
- Do you drive during “off-peak” hours? Most of the companies we work with give better scores (and therefore, bigger discounts) if you are on the road during “off-peak” times (retirees and stay-at-home moms, for example). If you’re on the road during rush hour like everyone else, you might not see as much of a benefit.
- Does your car get a lot of mileage? Your insurance company is more likely to offer a larger premium if you aren’t on the road too much.
- Do you drive a car that isn’t on the policy? If you drive a car that isn’t listed on your policy (a company car, for example), you can still benefit from Usage-Based Insurance, but you should stay away from app-based telematics, as they will include the times you are driving your work vehicle. (It’s worth mentioning, though, that truckers can benefit from Progressive’s Smart Haul program!)
- Do you have a teen driver on your policy? Telematics allow you to monitor your teen’s driving habits, so you can breathe a little easier when they’re on the road. If your teens prove themselves to be safe and responsible, the safe driving discount can mitigate the jump in premium when they are added to the policy.
- Do you want to reduce your rates without switching carriers? Overall, you get the best bang for your buck the longer you stick with the same insurance carrier. But if you aren’t satisfied with your rate (and don’t want to lose the discounts you already have by switching to a new carrier), Usage-Based Insurance is an easy way to get a significant safe driving discount.
If Usage-Based Insurance and telematics sound like a great idea, give your insurance agent a call to see if you’re eligible.
To accurately quote a traditional insurance policy, your agent has to rely on estimates, generalizations, and a seemingly endless stream of questions about your lifestyle and driving habits.
Usage-Based Insurance streamlines this process with the added result of a much more accurate quote; more accurate, because it is based on your own individual driving. Your rates are determined by how you drive, not “someone similar to you.”
In a hardening insurance market, having more data on customers’ driving habits gives insurance companies a leg up on predicting their risk exposure. Having the most accurate data possible prevents unprecedented rate hikes later on.
If you have any other questions about Usage-Based Insurance (or anything else about your coverage), give us a call at (407) 855-1000 or fill out an online quote form and one of our friendly and knowledgeable agents will be happy to assist you.