Car Insurers Eye Driving Skills To Set Prices http://www.npr.org/2012/08/06/158230767 ... ulate-cost
August 6, 2012
To the average consumer, car insurance can seem pretty arbitrary. What you get charged often depends more on where you drive than how you drive.
John Egan of InsuranceQuotes.com says it's very often about location, location, location. Two people, he says, can live in two different zip codes in the same city "and pay a substantially different amount of money, depending on exactly where [they] live in your community."
How much a driver pays also varies widely from state to state. State laws about personal injury and liability go into the mix, along with a whole host of other factors.
Massachusetts drivers pay the lowest premiums, Egan says, while Michigan drivers pay the most.
"In the Detroit area in particular, there are a lot of uninsured drivers," Egan says. "And when you've got more uninsured drivers, that tends to drive up the cost for everybody who does have car insurance."
A Whole New Pricing Model
But while those pricing swings from zip code to zip code are well-entrenched, there's also a big change under way in the car insurance business, as advances in technology transform how the industry functions.
"There's always been a lot of competition for auto insurance," says Bob Passmore, a senior director with the Property Casualty Insurers Association of America and a 30-year industry veteran. "But I think the way that insurers do business, and the way that they advertise their business, has changed."
One result — car advertising has proliferated on television.
But there are other shifts under way, as well. The recent recession, says Passmore, means there are fewer new cars to insure.
At the same time, the Internet is making it easier for consumers to find the lowest price — just as insurers are streamlining their practices with new high-tech tools.
"For the first time ever, we can now go in as an industry and observe individual driving behavior," says Richard Hutchinson, a general manager with Progressive Insurance.
"Historically, the industry has priced based on modeling, which is more arbitrary than an individualized quote based on one's actual activity," Hutchinson says.
But today, Progressive can put a device in your car that determines how well you drive — tracking if a driver frequently slams on the breaks, for example.
With that data, the company can then determine how much that driver should pay for insurance. Other companies are now following suit.
Better Rates, But At A Price
These kinds of advances are the cutting edge of the business, and companies are even moving from devices that track not just how you drive, but also tell you when you're doing something reckless or dangerous.
Dave Ferrick of Agero, a company that makes these types of in-car devices, says all technologies have trade-offs.
"The analogy I give is when we were all kids," Ferrick says. "If your mother said to you, 'You're going to go out right now [and] I'm going to put this thing in your hand, which [means] at any second I can call you, and you have to pick up the phone,' I would say, 'I don't want it.' "
Just like the cellphone took away some freedoms, Ferrick says, drivers will lose some freedom as technology advances.
"I can save you some pretty serious dollars on your premium," he says. "Are you willing to sacrifice, knowing that somebody is not watching where you drive, necessarily, but how that car is being driven?"
Thus far, only a small fraction of drivers have installed the tracking devices in their cars. For its part, the industry says tracking is the way of the future — and giving up freedom is the only way to save money.
Car Insurers Eye Driving Skills To Set Prices
- KonaCommuter
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Car Insurers Eye Driving Skills To Set Prices
Postby KonaCommuter » Tue Aug 07, 2012 4:49 pm
- gorilla monsoon
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Re: Car Insurers Eye Driving Skills To Set Prices
Postby gorilla monsoon » Wed Aug 08, 2012 12:32 pm
I'm surprised they are allowed to get away with it.
Some years back the NHTSA pushed for fitting black box-type incident recorders to cars but the US Supreme Court killed it because of privacy issues.
- Mulger bill
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Re: Car Insurers Eye Driving Skills To Set Prices
Postby Mulger bill » Wed Aug 08, 2012 12:41 pm
"It's for your own good."
"If you are doing nothing wrong you have nothing to worry about."
Unfortunately, too many peoples fall for it.
Shaun
London Boy 29/12/2011
- find_bruce
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Re: Car Insurers Eye Driving Skills To Set Prices
Postby find_bruce » Wed Aug 08, 2012 1:03 pm
The way this would come in is by the insurance companies offering significant discounts if you have one fitted & once enough people have done so, it will become economically difficult for the remainder to resist.
My concern is whether the device can actually tell whether you are driving safely - eg the driver that crosses an unbroken line to be well clear of a cyclist he or she is passing will be picked up, but not the driver who squeezes past 3 inches from the cyclists elbow.
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Re: Car Insurers Eye Driving Skills To Set Prices
Postby gorilla monsoon » Wed Aug 08, 2012 2:03 pm
Or the second option, there is no breach of privacy laws until it gets to court and the defendant has found himself a halfway decent lawyer.
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Re: Car Insurers Eye Driving Skills To Set Prices
Postby Ozkaban » Wed Aug 08, 2012 2:30 pm
The other thing is, lets suspend belief for a second and assume that we all of a sudden all become lovely drivers with doilies on the rear parcel shelf and white wall tyres... Do your premiums go down? Of course not - we're all the same risk as a percentage of the population in general, so we all pay the same (as the insurance companies certainly aren't doing this to decrease revenue, just expenses) but enjoy the sensation of being monitored constantly.
Cheers,
Dave
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Re: Car Insurers Eye Driving Skills To Set Prices
Postby jules21 » Wed Aug 08, 2012 5:04 pm
in theory, if we "all of a sudden all become lovely drivers", the costs to insurers would also go down. this would allow them to reduce premiums. it's not a zero sum game.Ozkaban wrote:The other thing is, lets suspend belief for a second and assume that we all of a sudden all become lovely drivers with doilies on the rear parcel shelf and white wall tyres... Do your premiums go down? Of course not - we're all the same risk as a percentage of the population in general, so we all pay the same (as the insurance companies certainly aren't doing this to decrease revenue, just expenses) but enjoy the sensation of being monitored constantly.
it's call price signals - using prices to positively influence more efficient behaviour. most people just think of prices as the nasty side of procuring a product and wish they were lower.
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Re: Car Insurers Eye Driving Skills To Set Prices
Postby zero » Wed Aug 08, 2012 6:03 pm
I would really, really, really like to see 3rd party insurance costs tied to accident and claim record, or even better a recovery requirement for (NSW) an at fault driver in NSW - ie the insurance should be there to protect the victim against the financial circumstances of the driver, rather than what it currently does which is indemnify the driver - which leads to irresponsibility regarding the threat of the motor vehicle to vulnerable road users.
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Re: Car Insurers Eye Driving Skills To Set Prices
Postby trailgumby » Wed Aug 08, 2012 7:48 pm
It was shopped to all the large insurance companies.
The response was decidedly cool.
They didn't see any value-add.
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Re: Car Insurers Eye Driving Skills To Set Prices
Postby high_tea » Wed Aug 08, 2012 8:12 pm
Which privacy laws are you referring to? and what are the consequences of a breach? Assuming there even is one...gorilla monsoon wrote:Not quite all that cut and dried, Bruce. There is a breach of privacy laws if those laws have ruled against such breach in the first place.
Or the second option, there is no breach of privacy laws until it gets to court and the defendant has found himself a halfway decent lawyer.
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Re: Car Insurers Eye Driving Skills To Set Prices
Postby jules21 » Thu Aug 09, 2012 11:08 am
TG - interesting as car theft has reduced considerably with the advent of engine immobilisers. the problem with those proposals is that they invariably require a discount on insurance premium. if you have say 10,000 discounted premiums and save 50 thefts, then you can quickly calculate if, as the insurer, you've saving or losing money. the point being, while an insurer has an incentive to reduce car thefts - it's not at any cost.trailgumby wrote:A "portfolio business" B2B company I worked for 15-20 years ago had procured rights to a black box GPS technology that would allow stolen cars to have their locations identified. It was pretty bulletproof and foolproof, and relatively inexpensive.
a classic example is agreed value insurance policies. justice depts have been screaming for years for insurers to stop issuing these, as they are a magnet for insurance fraud. last i checked you can still get them though - insurers just make more off the premiums than they lose off fraud. they are surely well aware of the problems. the cost to tax payers of prosecuting fraudulent policy holders is exorbitant - but the insurer doesn't bear that and doesn't care.
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Re: Car Insurers Eye Driving Skills To Set Prices
Postby Ross » Thu Aug 09, 2012 1:32 pm
Because if everyone had these black boxes a lot of people probably wouldn't bother to insure their car so no income/profit for insurance companies.trailgumby wrote:A "portfolio business" B2B company I worked for 15-20 years ago had procured rights to a black box GPS technology that would allow stolen cars to have their locations identified. It was pretty bulletproof and foolproof, and relatively inexpensive.
It was shopped to all the large insurance companies.
The response was decidedly cool.
They didn't see any value-add.
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Re: Car Insurers Eye Driving Skills To Set Prices
Postby Xplora » Sat Aug 11, 2012 4:23 pm
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