'Pay-as-you-drive' insurance catching on
Insurers are beginning to offer auto-insurance plans that charge motorists based on the number of miles driven.
Some of these 'pay-as-you' drive programs, which involve tracking the vehicle with an on-board monitoring device, would also charge drivers based on how abruptly they brake and accelerate.
Two large insurers currently offer pay-as-you-drive discounts. Progressive's MyRate program uses a device plugged into the vehicle's diagnostic port that tracks the number of miles driven, the time of day, and how aggressively the vehicle is driven. Every six months the driver sends the device to Progressive, which then calculates the insurance rate. The company says that, for each renewal term, a driver could see a savings of up to 40 percent based on his or her driving behavior. Unsafe drivers would pay more, says Progressive.
Each state has its own insurance rules, so this program is not available everywhere in the US. MyRate is currently open only to drivers in Alabama, Minnesota, Oregon, and Michigan. Starting next month, it will be available to drivers in New Jersey, the state with the nation's highest insurance rates.
The insurer GMAC has partnered with OnStar to create a Low-Mileage Discount program. Under this program, only the odometer readings are sent to the insurer, which calculates rates based on miles driven.
A report by the Brookings Institution's Hamilton Project estimated that if all motorists paid for accident insurance per mile driven rather than in a lump sum, driving would decline by 8 percent nationwide. Such a reduction, say researchers Jason Bordoff and Pascal Noel, would net society the equivalent of about $50 billion to $60 billion a year by reducing driving-related harms, and would reduce carbon dioxide emissions by 2 percent and oil consumption by about 4 percent.
But privacy advocates are concerned that monitoring devices could give up too much information about a driver. In a story about a proposed bill in California that would allow pay-as-you-drive insurance plans, the LA Times quotes Paul Stephens of the Privacy Rights Clearinghouse in San Diego:
"It's going to give insurance carriers your exact location at all times and could wind up being subpoenaed in divorce proceedings and other lawsuits," he told the Times.
Newark, New Jersey's Star-Ledger quotes Charles Samuelson, the executive director of the ACLU of Minnesota, who worries that such devices may nudge us closer to a surveillance society.
"We see this as kind of a creeping abduction of people's data," he said. "Basically, once they collect that data, it belongs to the insurance company. That's a big problem."
Progressive's [user-based insurance manager Richard] Hutchinson admits privacy has been a concern since the program started with a pilot project in 1999. He said the devices do not include GPS locators that would enable the company to track every movement. "The primary concern that comes up is: 'Are you tracking my whereabouts?'" he said.
A gas-price-relief bill before Congress includes a provision that would encourage car-insurance policies that reward low-mileage drivers with low premiums.
