Thursday, December 18, 2014
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Save on Auto Insurance: Drive Safely, Drive Less



Insurance companies want to give a break to safe drivers and those who log fewer miles. If that's you, you'll have to prove it. In a growing trend, insurance companies are cutting premiums for drivers willing to attach electronic devices to their cars to verify how far they drive each month and show that they are not aggressive drivers. Some consumers jump at the chance for savings, while others see Big Brother overtones.

Could you benefit? That depends on how long and immutable your commute is. If you have options like using public transportation or working from home, you could save money not only on gas, but on insurance.

As for the safe driver part, it depends on the drivers under your policy. "This type of insurance will benefit a safe driver who falls into a high-risk category," says Caroll Lachnit, features editor at Edmunds.com. "For instance, teenagers who would normally face higher rates because of their perceived risk could save money by proving they are careful behind the wheel." Here's a sampling of the programs.

Mileage measurement

GMAC Insurance's low-mileage discount plan is a version of such programs for owners of General Motors cars who have the OnStar service. OnStar, which also can alert an operator to call 911 in an emergency or remotely diagnose a car's problems, reports actual miles driven for subscribers who sign up for the insurance plan.

Discounts are based on how much less than 15,000 miles you drive in a year, although there is no penalty for driving more. For instance, if you drive between 7,501 and 10,000 miles annually, you would save 26%, or $208, if the starting premium was $800. The maximum savings of 54% comes if you drive very little—less than 2,500 miles a year. In that case, your premium would fall from a typical $800 to $368. GMAC says it has 30,000 low-mileage customers so far.

Mileage plus aggressive driving

The Snapshot program from Progressive Insurance is even bigger and involves more data. It has 100,000 customers and is available in 30 states (check this map to see if your state is one). With Snapshot, you plug a device about the size of a garage door opener into your car's diagnostic port (often under the dash below the steering wheel).

For 30 days, this gizmo sends data back to Progressive about how many miles you drive at what time each day and attempts to discern if you are an aggressive driver. (Lots of braking translates as aggressive since—annoyingly for the rest of us—tailgaters hit their brakes a lot). After 30 days, Progressive will tell you, based on your mileage and driving habits, whether you qualify for a discount of up to 30%.

Using public transportation or working from home could save money on insurance.

Progressive promises it will not raise anyone's rates as a result of data it collects with the snapshot device. The company gives these suggestions for enhancing your discount chances:

  • Brake gently and do not hit your accelerator and surge ahead every time the traffic clears a little. If you do that, you'll have lots of hard stops that show up as a negative.

  • Drive fewer miles than the average driver in your state if your location and commuting patterns allow it.

  • Avoid driving during peak rush hours or between midnight and 4 a.m. Rush hour may be hard to avoid if you must commute, but you might be able to cut down on those early morning hours.

Mileage plus speed

While other programs don't measure your speed, Allstate's DriveWise program doesn't shy away from that. Now in effect in Illinois, the plan will be rolled out to other states in coming months.

The device installed for DriveWise will note any time you exceed 80 miles per hour (mph). In addition to your mileage and episodes of hard braking and aggressive acceleration, Allstate pledges not to penalize you for enrolling in the program. If you do register speeds of more than 80 mph, the company says it still will not raise your rates. But if you show up as among the safest drivers, your savings could be up to 30%.

How should you decide if you want to try one of these programs? Think about these issues:

  • Can you cut back your mileage? Will you really take the bus or car pool to cut commuter mileage? And if you have just one car, will a road trip balloon your mileage total?

  • Will you really show up as a safe driver? According to surveys, most Americans believe they are safe drivers, with those other people on the road causing the accidents. Do you tailgate? Switch lanes a lot? Speed up swiftly any chance you get? I mostly don't do those things but would not want to worry about touching 80 mph some beautiful day on a wide-open interstate.

    Teenagers who face higher rates because of perceived risk could save money by proving they are careful behind the wheel.

  • What discounts could you get and what does it take? Programs vary. Be sure you understand potential discounts and any possible penalties before you plug in that transmitting device or sign up for a program.

Privacy pitfalls

Some privacy advocates worry that, if these programs prove successful, insurance companies will push ahead with more invasive monitoring.

For instance, Joel Ohman, a financial planner and founder of the website CarInsuranceComparison.com, notes that insurers someday might be able to tell if someone is talking on a cell phone or texting while driving. "They may be tempted to push the line further and further in the future and encroach on privacy," he cautions.

In addition, insurers could someday be able to tell exactly which addresses you visit. Frequent visits to bars, for instance, might penalize you. Like the Facebook Places locator application, this is anathema to many. Insurance company officials say they are not using the GPS (global positioning system) function and can assess risk without it.

Of course, parents of teenagers may feel differently about the privacy issues. If so, there is an iPhone app that can alert you if your teen is speeding and show you where the car has been.


Jerry Edgerton writes the Cars and Money blog for CBS MoneyWatch.com. He is a former automotive writer for Money Magazine and the author of "Car Shopping Made Easy."



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