Usage-Based Insurance (UBI) has been slow to get off the ground, but industry analysts predict that it is poised for a meteoric rise within the next few years.
UBI is a recent innovation, designed about a decade ago, that more closely aligns driving behaviors with premium auto insurance rates. The program relies on a telematics system installed inside the vehicle that captures real-time information. The telematics system tracks mileage, driving behavior, and the risks encountered along the way. It uses the miles driven, time of day, where the vehicle is driven, hard breaking, hard cornering, rapid acceleration, and air bag deployment to monitor how a driver fares.
This technology allows insurers to more accurately price auto insurance premiums based on the quantified risk of the driver, rather than traditional pricing factors such as age, garaging location, and type of car. This increases affordability for lower-risk drivers. It also gives consumers an incentive to control and decrease their premium rates by reducing miles driven and adopting safer driving habits.
A main reason why these telematics-based insurance policies are gaining popularity is that these devices appear to change the behavior of drivers. In a survey conducted by the Insurance Research Council (IRC), more than half of the 1,135 drivers said they made changes to their driving after installing a telematics device. The device, known as a dongle, costs around $100, so it’s only worthwhile if the driver receives a lower premium as a result of improved, safer driving.
While there are proven benefits for usage based auto insurance, it isn’t for everyone. Drivers won’t save much if they drive a lot or are an aggressive driver. The greatest discounts for usage-based polices are given to those who drive fewer miles than the average motorist. “The upside is that you could reduce rates because your insurer isn’t guessing about your mileage,” says Michael Barry of the Insurance Information Institute. That makes these plans ideal for some students, stay-at-home parents, retirees, and people who don’t commute by car.
If you only drive on the weekends or have a short commute, and are a cautious, defensive driver, then a usage based auto insurance policy may be right for you. The experienced insurance agents at Berliner-Gelfand & Co, Inc. in Connecticut have been helping individuals and families protect themselves for more than 50 years. We can help you select the right auto insurance coverage for you, so please contact our office for a quote today (203)-367-7704.