Auto insurers are always looking for innovative products to satisfied customer needs better. One type of policy is gaining widespread acceptance and popularity that is Pay As You Drive (also called usage-based, Pay As You Go or telematics) car insurance. It is a different concept from traditional policies that base their premiums on past records. Instead, these policies are priced based on actual data gathered.
Invention Born Out of Necessity
Companies are always hungry for more information. They are looking for new ways of measuring risk and factors that affect claims. Currently, they can get whole lot more information about a particular driver’s driving patterns and habits thanks to a little device they can install on cars. They can tell how often they brake and how well they drive. They can also know when the vehicle is in use and how many miles a year it travels.
Those are all valuable details in terms of measuring driving related risks. The more information will allow companies measure the possibility of receiving a claim better. As a result of better risk assessment they can price their policies spot on. Actually, they can price policies individually since they can collect information from each car which is fitted with a telematics device.
Technology Used to Gather Information
The advancements in the navigation and telecommunication technology make previously unmeasurable data available. These plans can now be offered thanks to technological advancements that allow monitoring. Telematics are devices that are fitted in cars’ on-board computer or GPS systems. They allow companies collect and measure driving related data.
Also, advancements in computer programing make it possible to tailor premiums according to specific data received from each auto. Driving patterns and vehicle usage become the main factors in offering someone lower or higher rates. As a result, drivers who join the program can enjoy the benefits as long as they improve their driving. It is not hard to see that such drivers would feel the pressure to do better, correct their mistakes and practice defensive driving.
How Does Telematics Help Motorists?
When you have great driving records, no claim history for years and excellent credit score you will have no problem getting the absolute best car insurance rates. Most insurers would want to insure you and don’t want much money to do so because you have proved to be a very low risk. They don’t expect you to make a claim anytime soon.
You will have a much harder time to find affordable premiums when you are considered to be high risk. Main reasons for being quoted high premiums are lack of driving history, young age and recent bad records like having too many traffic violation citations or claims. Actually, you can pick up two traffic tickets in a day with so many speed and red light cameras one after another in cities.
When you have something to prove you may want to get on with it and prove. In this context, you may want to prove that you are much better driver than you are given credit for. For example, young drivers are considered to be the highest risk motorists and they are charged high premiums. If you are a teenage driver you would be bundled in with this group of drivers and required to pay high premiums too. If you believe you are a responsible young person you may want to agree to your driving being monitored in order to prove a point.
Once insurers are happy with the collected data and convinced that you are a good driver you can save as much as 50% on your premiums. Possibility of these levels of savings encourages many motorists to take Pay As You Drive Auto Insurance options. Some companies may offer savings straight away for agreeing to monitoring devices. And you get further discounts after the initial monitoring period.
Availability of Usage Based Car Insurance Packages
More and more companies are offering such plans especially in countries like the USA, UK, Italy and Germany. They are slightly different in the way operated or the technology used. However, the idea of basing premiums on actual usage is the same. Depending on where you live you may want to check which companies offer such policies and see if you would benefit from them.
For example, Progressive in the US offers a trial period to interested motorists. You can get the device posted to you and you install it yourself. You can try it for a month and see if you will be able to save money. If not, you can disconnect it and send back to the company. This is a great way of making sure that you will save money at the end.
There are also less intrusive methods of calculating premiums according to your usage. For example, there are plans that work on reading the odometer often and feeding the information to your insurer. If you have no objections to monitoring devices you may want to take advantage of Pay As You Go types of policies.