Why Letting Your Insurance Company Monitor How You Drive Can Be a Good Thing

Hugh Pickens DOT Com writes "Kim Gittleson reports at BBC that car insurance firms like Progressive are trying to convince consumers that letting them monitor their driving behavior is actually a good thing. They say that the future of car insurance is not just being able to monitor individual drivers to give them lower prices, but also to make them better drivers. 'Now that we can observe directly how people drive, we think this will change the way insurance works,' says Dave Pratt, who says that Progressive has more than a trillion seconds of driving data from 1.6 million customers. '18-year-old guys pay a lot for insurance, but some 18-year-olds are really safe drivers and they deserve a better deal.' Better big data technologies, like the telematic driving data collected by car companies (PDF) or even information gathered from social media profiles, can help augment that risk profile. 'If I'm a driver that doesn't drive that frequently, and I have a pattern that would indicate that I drive more carefully than an average person with my profile, then I may be able to save 30-40% on my car insurance, and that's pretty significant,' says Joe Reifel. For now, using big data analytics for insurers is still in the early stages. Only 2% of the U.S. car insurance market offers an insurance product based on monitoring driving, but that proportion is projected to grow to around 10-15% of the market by 2017. And other countries, like Italy and the U.K., are already using the data to analyze not just risk profiles but also to determine who is at fault in car accidents. The future, most analysts agree is create a continuous feedback loop between insurers and consumers, so that consumers will react to the big data analyses that insurers perform and change their behavior accordingly. 'Bad drivers will at some point need to improve their driving or accept [having] to pay for the real risk they represent,' says Jacques Amselem."

Huh

[Anonymous Coward]

> They say that the future of car insurance is not just being able to monitor individual drivers to give them lower prices

So look, I've got this bridge I've been trying to sell...

A trillion seconds?

[Antipater]

Progressive has more than a trillion seconds of driving data from 1.6 million customers.

Using a gigantic amount of very small units tends to make the whole thing meaningless. In more meaningful terms, Progressive has about 174 hours of data per customer.

It can't possibly be accurate

[Anonymous Coward]

I live 2 miles up an unmaintained private logging road. An accelerometer would go nuts on all the bumps and make it look like I'm driving terribly, when in reality I'm creeping over holes, ruts and rocks at 5mph, in middle of nowhere, with nothing to hit except a moose.

Yeah... NFW am I getting this.

How can this work?

[jbmartin6]

How can cutting the premiums of safe drivers work in practice? Isn't the idea of insurance that the premiums of those who don't file claims is what pays for the claims of others? If they cut all the premiums of the safe drivers, where is the money for the claims of the unsafe going to come from? My guesses: they are not paying out many claims since they just drop unsafe drivers, or perhaps they will simply recoup the money by raising the premiums of any driver who files a claim. In the latter case at least, your 'insurance' is perhaps no more useful than a credit card.

Offer lower rates?

[Overzeetop]

When ever someone offers you the opportunity for lower rates by providing more information, what they are really offering is the opportunity to either eliminate you from their liability pool or raise your rates. Insurance is, in an efficient market like auto insurance, a zero sum game. Those whose rates get lowered must be offset by those with higher rates unless the overall claims volume is reduced.

Bad drivers already are in a feedback loop from their insurers. Anyone who has received a moving violation or been in an accident feels the pressure of insurance premiums. It's the only reason I get concerned about a speeding ticket - $150 for getting caught doing 12-15mph over on the freeway is annoying; having my premiums go up $400/year for 2 or more years is far more punishment than the courts are doling out.

Re:Safe = Slow = Low?

[jonnythan]

That's not how it works, actually. Progressive's Snapshot discount doesn't take speed into account at all.

The three things they look at are:

1) How often you drive (miles)
2) What time of day you drive
3) Number of hard stops

I noticed that driving with a Snapshot for 6 months I became a lot more careful of hard stops. I gave other cars more space and drove much more defensively, even though I'm a very defensive driver already.

I think it's safe to assume that an insurance company is interested in metrics that actually correlate well to safe driving, since their business literally depends on it. They want to give the discounts to people who are actually less likely to get into accidents.

Progressive isn't the government. They don't want to just look like they're doing something about a problem. Their bottom line actually depends on it.

Re:Huge discounts

[jonnythan]

I got a 30% discount on one of my cars and an 8% on the other. This is a discount applied over the regular rate that I pay.

So..... it might not be 50%, but the answer to your question is "yeah, pretty much" instead of "crickets."

Re:I guess what is comes down to ...

[Joce640k]

"Brakes", the word is "brakes"...

Re:Huh

[somarilnos]

It actually evolved entirely the opposite way. I'm a former employee of Progressive. They started out piloting it by having it in 24/7 (it was called MyRate at the time). They determined that largely, the behavior that they saw in 30 days was a good enough picture of someone's actual driving habits (i.e., it's exceedingly difficult to represent yourself as an amazing driver if you're not). That's why they switched to the current model and named it SnapShot. It costs money monthly to operate the device (SMS service), so if they can get the information without continually monitoring, it makes sense to operate with the current model.

Re:Huh

[Anonymous Coward]

Or you live in Memphis, TN, and are driving within the 40mph speed limit. A carload of gangbangers tries to box you in with the help of a second car full of gangbanbers. You tromp on the gas, accelerate briskly to 55mph and escape this pincer tactic to cause you to stop and let them jack your car (and your wallet and probably your life).

The above happened to me regularly the last few years that I lived in Memphis. The acceleration that my V-8 provides saved a variety of insurance companies a ton of money--car, home, medical, life insurance companies. A Flo-bot in car would have cancelled my car insurance. Without a Flot-bot, my rates actually went down when I moved away from Memphis.