Whether you can enroll in a usage-based insurance discount program will depend on what state you live in who you have as your car insurer. This FAQ will give you some background on programs from major insurers and the states where they're available.
Usage-based discounts started out by tracking how many miles a car was driven over the course of six months or a year and then cutting the premiums of policyholders who drove their cars less frequently than average. The idea was simple: The less time you spend on the road, the less of a chance you have of getting into an accident. But since then, UBI has become more widely available and more complex. Now, insurers look at a larger set of factors.
Progressive's Snapshot was the first major usage-based insurance program to look beyond mileage and actually take into account other variables, such as the times of day you drive and how often you brake abruptly. And as Progressive's program grew, other major insurers took note and began developing similar programs.
If you're thinking of enrolling in a UBI program, one thing to think about is how much you could actually save. Most insurers advertise their maximum discount for the program, while the average discount is usually not as high. For instance, Progressive has cited maximum savings of around 25 percent for policyholders; but the New York Times reports that more than half of enrollees earn discounts and that the average discount is 10 percent a year.
Though the concept of UBI discounts seems foolproof, companies haven't seen completely smooth sailing as they try to deliver it to American consumers. Many consumers have outright rejected the idea of a device-driven program. Progressive executives said in a 2013 conference call with investors that privacy of data monitored by the device is a main concern of consumers, with many irked by being tracked by their car insurer.
UBI programs are expected to become more readily available, while they're not all currently available in all states in the U.S. Advances in tracking technology make it likely that, if the program you want is not in your state, patience will be a virtue; the Insurance Information Institute estimates that a major UBI program will be available to you within the next two years.
For example, American Family policyholders can take only advantage of development of UBI technology as part of a research trial hosted by the car insurer. Though there isn't a discount on coverage available yet, participants will get $50 in gift cards by the end of trial.
USAA also has plans to debut a UBI program after becoming the first licensee of telematics technology from Progressive. At AAA, a non-device discount program called the Verified Mileage Discount simply requires a "current odometer reading when requested" that will cut coverage costs if the policyholder drives within a certain number of miles.
For a handy industry guide to UBI, review this 2012 slide presentation from the National Association of Insurance Commissioners (NAIC).
With the potential for savings, Snapshot and other usage-based insurance discounts are changing the way people buy auto policies. But exactly what products are being offered by which insurance companies?
What it is: Snapshot is a program that monitors, among other things, how often a driver brakes hard, what times of day the car is driven, and how far it's driven on average per day. All of these data points are collected through a small device that plugs into the car's diagnostic port and sends the data to Progressive. Progressive notes that it doesn't track your location or driving speed. The company also notes that you won't see higher rates for poor driving.
Savings: Snapshot boasts savings of up to 25 percent for policyholders that drive safely and less frequently. According to a November 2012 New York Times report, "more than half of Snapshot participants earn discounts, which average 10 percent annually."
Availability: Snapshot is available in all states except AK, CA, HI, IN, NC, and MA. Progressive offers Snapshot to all drivers with a Progressive policy. The company also allows drivers insured by any company to "test drive" Snapshot for 30 days if they live in a state where Snapshot is available.
Downsides: While Snapshot currently does not track a driver's speed and location, Progressive has patented and designed the device to one day track those conditions. Those variables could eventually mean consumers pay higher insurance premiums if they speed or drive often in poorer or crowded neighborhoods.
What it is: Drivewise monitors a driver's habits through a device that plugs directly into the car's computer. The device is available only through an Allstate agent. The device monitors speed, braking events, time of driving, and mileage to offer discounts.
Savings: Drivewise enrollees are entitled to a one-time 10 percent discount just for trying the program. Allstate advertises savings of up to 30 percent based on a 90-day period of driving monitoring.
Availability: Drivewise is currently only available in AZ, CO, CT, FL, IL, IN, KY MD, MI, MN, MO, MT, NV, NJ, NY, OH, OK, OR, PA, TN, UT, and WA.
Downsides: Online complaints about Drivewise from participants center largely on what they say is a lack of significant savings.
What it is: TrueLane uses a device manufactured by OCTO USA that plugs into your car's computer to monitor driving habits. The Hartford says bad or poor driving recorded in the TrueLane Program will not be penalized with higher premiums for the policy holder.
Savings: TrueLane enrollees are entitled to a 5 percent discount for every car they enroll in the program. The Hartford advertises savings of up to 25 percent, although expects the average discount to be between 10 and 12 percent.
Availability: TrueLane is currently only available in AZ, AK, CT, MN, MO, NV, NM, OK, OR, SC, VA, and WV.
Downsides: The program is available only in 12 states. A lost or damaged OCTO unit results in a $100 dollar charge. Electric, hybrid and diesel vehicles are not eligible for TrueLane because the OCTO unit cannot reliably track their movement.
What it is: The Low Mileage Discount is offered to OnStar customers with National General Insurance (formerly GMAC). The tracking system only monitors the distance traveled and does not include speed, braking, or time of travel.
Savings: The amount saved directly correlates with the amount driven. National General advertises savings of up to 54 percent. However, that savings is only extended to drivers who travel less than 2,500 miles per year. Average savings of 13 percent would be had for drivers who travelled less than 15,000 miles per year.
Availability: The Low Mileage Discount is offered in 35 states, although the company does not list which states the program is available.
Downsides: Only drivers with the OnStar navigation system can access the Low Mileage Discount. And while National General is the only insurance provider not to capture potentially bad driving information such as speed, turn ratio, and time of day driving, if a car goes over 15,000 miles in a year, the driver is no longer eligible for the discount during renewal.
What it is: Esurance uses a device much like other insurers that will track driving habits like "speeding and sudden braking." DriveSense statistics can be accessed through a "custom website where you can monitor and analyze the driving habits of whoever gets behind the wheel." Website extras include email notifications that'll tip you to your teen's usage of the vehicle to your own driving habits.
Savings: According to Esurance, savings can go as high as 30 percent. Depending on the state, a 5 or 10 percent discount is applicable at the outset of device usage.
Availability: The program is currently available in AR, AZ, ID, IA, IL, MA, NE, RI, SD, and TX, with Esurance planning to expand the program into more states in 2014.
Downsides: Esurance is a relatively new car insurer with a relatively new UBI program. While Esurance has now opened up sales of its policies in more than 40 states, DriveSense trails that figure with less than a dozen states where the UBI program is available.
What it is: Travelers will send enrollees a "small device in the mail" that will "track your mileage towards a potential low-mileage discount that would be applied when the policy renews." While safe driving habits like soft braking won't get IntelliDrive-rs cheaper car insurance, they will be tracked by the device through an online web portal that'll help monitor those habits for safer driving in general.
Savings: There is a "sign-on" discount of up to 10 percent, with a low-mileage discount of up to 30 percent if the participant keeps his or her annual driving under 13,000 miles.
Availability: IntelliDrive is available in AL, CT, IN, IL, ME, OH, OR, and VA.
Downsides: Travelers' program has very limited availability compared to UBI programs from competitors and is only offered in eight states in the U.S.