I've heard more and more stories where insurance companies are getting creative with how they come up with their auto insurance premiums, to where some dynamic factors are brought into play.
Traditionally, insurance premiums are set by fairly static inputs:
- Where you live – The frequency of crime in your area plays a big role in what you pay for insurance
- What car you drive – Certain cars are more likely to be robbed and I've even heard that certain colors of cars (bright red) have a higher incident of accident, so you could pay more for certain elements
- How much you drive – Our insurance premium factors in how many miles we put on our car during an average period. The more you drive, the greater chance you have of an accident, I suppose.
There are things here that are within your control, most namely the type of car and the features you have, but a lot of these factors are probably a bit out of your control. Most people aren't going to move so that they can drive a few miles less to work, leading to a few bucks getting knocked off your policy.
But what if there were other factors that could directly impact your prices?
One of the things I've seen are devices that can track your speed. Many devices are tied in with the GPS system, so it will know exactly what road you are on, what speed you are traveling, and the speed limit of that road. Insurance companies can then track whether you're speeding, and your premiums could be adjust accordingly. If you are a speeder, they will deem you more likely to be involved in an accident, and conversely, if you obey the speed limit, the idea is that you would be less likely to be involved in an accident.
Insurance companies set their rates based pretty much on the likelihood of events, so if they have additional factors that can go into spitting out the likelihood that you'd be involved in an accident, it could work to their advantage.
Would this actually work?
My gut tells me that the biggest group that would stand to benefit are the people that don't speed at all or who do so very little. I think that people who typically travel of the speed limit might say that they could give up speeding, and maybe they even could for a while if the device were installed in their car, but that they would go back to their own habits once the novelty of having the new device wore off.
The thing is, I'm pretty sure insurance companies would count on this. After all, they aren't going to want less premiums paid overall. They're still going to want to collect the same amount of money to cover their costs. So, while some drivers would save money if they truly were able to go without speeding, the fact is that some drivers could actually see their premiums go up if the insurance company were to really get a glimpse of how they drove.
The biggest ‘what if' question surrounding these types of devices would be to find out what insurance companies would do about drivers that didn't accept these devices to be placed in their car. Would they be given free reign to raise their rates to a higher level with the assumption that they don't want the device because they drive in an unsafe manner? I'm not sure. I think a lot people would argue that they drive perfectly safe, but that they wouldn't want the device because they don't want to be tracked. This is perfectly reasonable, but I honestly think that this day in age, there are plenty of ways that ‘Big Brother' can track us with or without our knowledge (though I know this is becoming somewhat of a common add-on in cars driven by teen drivers, even if just for their parents peace of mind)
Personally, I drive a bit over the speed limit but I try to keep it reasonable. I think my habits would be improved if there were such a device installed, though I'm sure that I wouldn't become a perfect driver. It could benefit us for some of our trips, because when I'm towing our camper, I almost always drive under the speed limit anyways out of sheer necessity. So, that could work to our advantage.
As of now, I've not seen any offerings of this technology. I'm not sure if it's our insurance company or the state where we live, or maybe it's just too soon.
Readers, what would you do if you were offered this technology with the idea that you could have your rates lowered if the monitor showed that you drove within the speed limit? Would you have to adjust your current driving habits to meet the criteria or do you drive under the speed limit anyways?