The auto insurance industry hasn’t changed much since it first stabilized following widespread adoption of personal cars. Ever since then, the industry has looked at past statistics and risk factors to estimate their risk profile and therefore their customer’s monthly payments. So it has been for decades, much to the chagrin of many a car driver. Now, increasing adoption of “pay as you drive” insurance plans present an opportunity to do away with this system of averages. Though usage-based insurance — also known as pay as you drive insurance — was first introduced a decade ago and many car insurance companies like Allstate, Progressive and State Farm already offer usage-based plans, the concept is not yet mainstream.
With the advent of small, web-connected devices it finally became possible for insurance companies to obtain data about a single driver’s habits and characteristics. This in turn allowed the companies to readjust their presumed risk profiles based upon how much a particular driver actually drives, what time of day they drive, their average speed, and a slew of other characteristics. Of course this segues immediately into privacy concerns, Driving information is collected by a telematics system — either by using a system like OnStar, Ford Motor Co.’s Sync or a device that plugs into a vehicle’s diagnostic port. Information is stored and available for an insurance company to review to determine if a driver is eligible for discounts. Despite this, yet more than one-in-three insured drivers would consider switching from a traditional vehicle insurance plan to one based on customized metrics, according to a survey conducted by Lynx Research Consulting.