Yes, Many Insurers Offer Discounts for Using Telematics
Some of America’s largest insurance companies now offer discounts to customers who use telematics devices. These devices track the driver’s behavior, allowing the insurance company to provide a customized quote based on the driver’s measured risk factor.
Progressive Insurance, for example, offers discounts through its Snapshot program. Allstate has its Drivewise program.
With these telematics driver tracking programs, insurance companies will often guarantee a small discount: drivers might be guaranteed a discount of at least 5% just for agreeing to use the tracking device, for example.
Meanwhile, drivers who have a very low measured risk factor may get discounts of up to 40% or 50% by using the telematics devices.
If you drive fewer miles than average per week, for example, or if you drive outside of busy rush hour traffic, then you might have a significantly lower risk factor than another driver in the insurance pool. That’s why the insurance company rewards you with cheaper rates.
What Are Telematics Devices? How Does Usage-Based Insurance Work?
Sometimes, telematics devices are tracking devices installed within your vehicle. In most cases, however, today’s insurance companies just use an app or a dongle attached to your smartphone.
You can install the Progressive or Allstate apps, for example, and enable Snapshot or Drivewise. The app uses your phone’s location tracking and other sensors to determine your driving habits.
To use the app and qualify for usage-based insurance, your phone’s location data must be on at all times.
After using these devices, your phone creates a customized driver profile. Based on this customized driver profile, you might have a lower measured risk factor and pay lower insurance premiums.
Typically, insurance companies shoehorn drivers into various policies based on their demographic data and accident data: a 22-year old male driver with no accident history, for example, will pay the same insurance premiums as another 22-year old male driver with no accident history – even if those two drivers use their vehicles in vastly different ways.
Which Companies Offer Telematics Car Insurance Programs?
All of the following companies offer some type of telematics programs
Progressive: Progressive’s Snapshot uses a telematics device to monitor the times of the day you drive, any sudden changes in speed, hard braking, and rapid acceleration, and other metrics. To qualify for a discount, you will need to have the Progressive Snapshot telematics device in your vehicle for one standard six-month policy period before the collected data can affect your premium. Good drivers can save 10% to 30% using Progressive’s Snapshot.
Allstate: Allstate’s Drivewise program guarantees you 3% cash back just for signing up for the program. The app lets you view your last 100 trips, your rewards from those trips, and a breakdown of your driving behavior. Car insurance premiums are calculated based on data points like your “safe speed” (under 80 miles per hour), safe breaking (minimal abrupt stops), and the time of day. You don’t have to be an Allstate customer to use the Drivewise app: some drivers use it just to monitor their behavior. The average driver saves about 10% to 25% using Drivewise.
State Farm: State Farm has a telematics program called Drive Safe & Save. The system uses either your OnStar device or a mobile device paired with a Bluetooth dongle provided by State Farm. State Farm claims good drivers can save up to 50% through the Drive Safe & Save program. Drivers who drive fewer miles than average (fewer than 7,500 miles per year) may save the most.
Esurance: Esurance DriveSense gives drivers 10% discounts just for signing up. The program uses the same data as other companies above, including your speed, braking, mileage, and time of day. Safer drivers will receive a customized quote and pay lower premiums. Esurance’s DriveSense is only available in the following states: Arizona, Colorado, Connecticut, Georgia, Kentucky, Louisiana, Maryland, Michigan, Minnesota, Missouri, New Jersey, Ohio, Pennsylvania, South Dakota, Texas, Utah, Virginia, and Washington.
Nationwide SmartRide: Nationwide’s SmartRide gives drivers an instant 10% discount just for signing up. When your policy is next renewed, you will receive a customized premium based on how safely you drive. There’s a maximum discount of 40%.
Liberty Mutual: Liberty Mutual’s RightTrack program uses a plugin device that needs to be installed 30 days prior to the start of your next policy. After 90 days of using the device, you will receive your safe driving “score”. Liberty Mutual claims drivers can save 5% to 30% based on their braking, acceleration, nighttime driving, and mileage.
All of the companies above are major American car insurance providers that offer telematics-based car insurance discounts. However, some smaller companies or regional insurers also offer similar telematics programs.
Drawbacks of Telematics Devices
There are two main drawbacks of telematics devices:
The main drawback of telematics devices, of course, is that your insurance company is collecting a wealth of data about you.
Your insurance company knows where you go, how often you go there, how long you spend there, and other intimate details.
Most insurance companies have detailed data privacy terms attached to each telematics device. The simple truth is, however, that insurance companies know significantly more about you after using a telematics device, and they may be able to sell this data to third parties or utilize it in other ways. Even if the company doesn’t plan to sell the data, the data could be hacked, stolen, or lost.
It Makes It Difficult to Compare Insurance Quotes
The other main drawback is that telematics devices give you customized car insurance quotes, and this makes it increasingly difficult to compare policies.
Insurance companies want to make it as difficult as possible for policyholders to compare insurers and switch. Today, it’s easy to switch from your GEICO $100 per month plan to a $90 Allstate plan to save money. It’s harder to switch if you have a customized GEICO $89 per month plan and an unknown customized plan from Allstate.
Yes, using telematics devices can help you save money on car insurance. Some companies guarantee cost savings of at least 5% in exchange for activating the tracking system.
If you’re a safe driver, or if you drive fewer miles than average, then you may save anywhere from 20% to 50% by using a telematics device – as long as you don’t have privacy concerns about your insurance company tracking you.