Saving money is all over the auto industry, from manufacturer to the usual driver. For the latter, after choosing a lower-cost vehicle with improved gas mileage there is another trick: usage-based car insurance could bring double-digit savings.
Depending upon their driving habits, drivers could save between 5% and 30% on their insurance premiums, according to analysts. The move from traditional car insurance to one based on when, how far and how often a vehicle is driven is not without issues. Drivers are giving up some privacy with these plans; however, more than one-third of those surveyed by Lynx Research Consulting said they’d make the switch.
The National Association of Insurance Commissioners projects that 20 percent of all insurance plans will incorporate pay-as-you-drive features within the next five years. Also, big players like Allstate, Progressive and State Farm, have started offering such plans.
“While UBI continues to become more mainstream, many consumers also find the use of their smartphone in UBI appealing,” said Ash Hassib, senior vice President and general manager, Auto Insurance, LexisNexis, which commissioned Lynx Research to conduct the study.
Opponents claim that the estimates are too high, suggesting that moving from less than 1% of all insured drivers using this type of plan to 20% is unlikely. In the mean time, also pfront costs of devices that transmit and track driver information are still high: more than $100 per customer, plus the cost — usually a few dollars each month — to transmit the information to the insurance company, which then reviews it and determines if a driver is eligible for a discount.