Usage Based Insurance – What Is It?

Most people have never heard the phrase, usage based insurance. And yet, many would recognize the television commercials that many insurers are using to get you to jump into this emerging technology. Those commercials promise to lower your premiums if you’re a “good” driver. And who gets to determine whether or not you’re a good driver? The ads would have you believe that it’s YOU… but in reality, it’s the insurer who makes that determination. You simply have to install a device on your car (or via your smartphone) and do what you always do: drive.

Here’s What They Don’t Tell You

When you agree to usage based insurance, it’s usually because you believe that you’re such a great driver that you truly believe that your rates will go down. All too often, the opposite happens. With usage based insurance, premiums can – and often do increase. They don’t put that into the commercials, because that wouldn’t look good for business.  Here’s what they’re not telling you.

Usage based insurance tracks many, MANY things. It can track what time of day you drive your car (or how late into the night… just saying). It tracks how fast you accelerate and how hard you brake. It knows how fast you take turns in the neighborhood, and what speed you’re going in the grocery store parking lot. It knows how many miles you drive, and exactly where you went. And you better believe: this information can – and will be used against you!

This Is The Future

The speed of vehicle development and the inclusion of technology into cars these days makes the adoption of usage based insurance a sure thing. Today, it’s optional. Soon, however, trends will force this technology upon all of us, like it or not. In fact, it’s already happening every single day on your smart phone. Whether you have an Apple or Android phone, it has constant connection with both cellular and WiFi receivers. Your phone has the capability of connecting to satellite signals which both notify you of your present location, but also records every street, turn and stopping place along the way.

They’re After Your Data

At the end of the day, insurance companies want you to sign up for usage based insurance because that gives them access to more and more of your data. And what do they do with that data? Well, they more accurately assess the rates of your premiums – and believe us, the only winner in that scenario is the insurance company. Secondarily, they can – and will – sell your data to other interested parties, including – but not limited to – advertisers, their partner collision centers and various agencies interested in developing their own software/hardware.

We don’t share this information with you to scare you about usage based insurance. As stated above, there’s not much anyone can do about the trajectory of this trend. But we firmly believe that knowledge is key to making informed decisions when it comes to who you insure with, and what you expect if and when you decide to opt-in.  If you have any questions about your insurance, and whether or not usage based insurance is right for you, feel free to contact us here.

Click here for the Wyoming Dept. of Insurance article on this topic.