Telematics: Cutting Edge Auto Insurance for 2020

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As technology and customization is valued more and more, the biggest and best auto insurance companies have risen to the challenge. They came into the digital age by expanding their online presence and proving to potential customers just how accurate are online insurance quotes.

They’ve found another way to connect with technology to broaden their appeal — telematics; i.e., the more information they have about your driving, the more they can customize your rate for you.

Online auto insurance quote tools have been around long enough for most everyone to have tried them or at least know of them. But how familiar are you with telematics? Find out who is doing what, as well as the new insurance companies giving the insurance giants a run for their money.

Why We’re Driving Less

You may be surprised to learn there are more factors than just the coronavirus driving the decline of vehicle use in 2020.

COVID-19 Reduces Driving

According to Arity, the number of people driving on a given day initially dropped to around 40 percent in mid-March, and after remaining relatively consistent for a couple of weeks, has been on the rise, currently sitting around a decline of 20 percent.

Since there are fewer people on the road total, and those that are on the road have been driving fewer miles, total miles driven is still down more than 30 percent.

Workers Are Parked at Home

Workers Are Parked at Home

The massive shift to work from home because of COVID-19 saw 88 percent of organizations encouraging or requiring their employees to work remotely..

But even prior to the pandemic, working remotely was becoming the new normal. Between 2005 and 2017, there was a 159 percent increase in remote work. In 2015, 3.9 million U.S. workers worked remotely. And by February 2020, the number was 4.7 million — 3.4 percent of the population.

Having a choice of work environment has become a desirable employee benefit. Many remote workers say they even forego vacations, pay raises, and retirement plans in order to eschew the sterility and monotony of office life as well as enjoy more flexibility in their hours. They claim that working remotely reduces stress and improves their morale and productivity.

It’s also good for business because it reduces the amount of real estate needed. Telecommuting is good for the environment, too. Greenhouse gas emissions were reduced by an amount equal to 600,000 autos in 2020.

Consumers Are Parked in Convenience Mode

We love our Amazon, and it’s hard to imagine life before ecommerce. More than a third of consumers shop online weekly since coronavirus hit, a 28 percent increase from pre-COVID levels.

In addition to shopping, the popularity of on-demand food delivery has been rising since before coronavirus and the future of food-delivery apps is estimated to continue expanding even as quarantines are lifted and restrictions are being eased.

It’s so easy and convenient to download, search, choose, and pay for something delicious to appear at your doorstep.

Rideshare Industry Helping DUI Rates

According to the Pew Research Center, Americans who use ride-hailing services have more than doubled since 2015. And that was pre-coronavirus. The rideshare industry, like most industries, has taken a hit during the height of the pandemic.

But there are many reasons ridesharing has been and will return to be on the rise. People can safely have a “night on the town” without worrying about driving while under the influence, which has reduced drunk driving rates.

Paying for someone else to drive means less wear and tear on your own auto. And if you live in a major city, you may not even need a car. And as always, it’s also about the convenience. Ridesharing is another service that is instantly available at your fingertips.

The Basics of Telematics Auto Insurance

Telematics Auto Insurance

Auto insurance that is customized based on your driving habits is telematics auto insurance. Through the use of an electronic device, either via a mobile app or a plug-in, your driving habits are monitored whenever you hit the road. Information collected includes the number of miles you drive, your speed, your braking, and when you drive are recorded, and you pay based on that data.

The industry term for this product, which started to be offered in the mid-1990s, is usage-based insurance (UBI). It’s also called pay-per-mile insurance or pay-as-you-go insurance.

The basic selling point is that safe drivers who don’t put a lot of miles on their vehicle shouldn’t pay the same rates as their more reckless colleagues, or be lumped in the same risk category as people who log higher-than-average annual mileage.

The concept has spread quickly. Nearly a dozen insurers have mentioned telematics or their specific programs in corporate earnings calls since 2018, indicating driving apps are becoming a bigger strategic priority.

The Pros & Cons of Telematics

The win-win of usage-based insurance is for low-mileage drivers who are safe drivers. If you drive under 10,000 miles a year and at off-peak times with a clean driving record, you could save a lot of money by customizing your coverage.

And with information being taken on your auto, you’ll be at an advantage if your auto is taken. You have a guaranteed tracker on your vehicle in case it’s stolen.

The downside of telematics is that many of the usage-based programs are not available nationwide. And even an insurance company whose business model is based on pay-per-mile auto insurance is only available so far in eight states.

So if you have usage-based auto insurance and you move to another state, not only do you need to abide by that state’s minimum vehicle insurance requirements, but you may also have to seek new coverage or even a new insurance company altogether.

Another factor to consider is your comfort level regarding your privacy. You have to enable location and motion detection, and you must turn on notifications so that a mobile app can gather information while you drive.

Telematics Insurance Opportunities

Here are a few of the largest auto insurance companies and what they offer, as well as their competition.

State Farm’s Drive Safe and Save

Device – Mobile app or Plug-in

Enrollment Discount – Up to 5 percent

Earned Savings – Up to 30 percent

Purpose – Tracks your driving habits

Geico’s DriveEasy

Device – Mobile app

Enrollment Discount – N/A

Earned Savings – Up to 20 percent

Purpose – Tracks your driving habits

Progressive’s Snapshot

Device – Mobile app or Plug-in

Enrollment Discount – Average of $25

Earned Savings – Up to 20 percent

Purpose – Tracks your driving habits

Allstate’s DriveWise and MileWise

DriveWise Device – Mobile app

Enrollment Discount – Up to 3 percent

Earned Savings – Up to 15 percent

Purpose – Tracks your driving habits

 

MileWise Device – Plug-in

Enrollment Discount – N/A

Earned Savings – Up to 20 percent

Purpose – Tracks your mileage

Nationwide’s SmartRide and SmartMiles

SmartRide Device – Mobile app or Plug-in

Enrollment Discount – Up to 10 percent

Earned Savings – Up to 40 percent

Purpose – Tracks your driving habits

SmartMiles Device – Plug-in

Enrollment Discount – Up to 5 percent

Earned Savings – Up to 40 percent

Purpose – Tracks your mileage

Usage-Based Insurance Opportunities

Just as Esurance gave conventional auto insurance companies a run for their money starting back in 1999 by selling direct to consumers online, there are two companies who’ve been doing the same with usage-based insurance for the past few years.

Metromile

The San Francisco-based company has been exclusively selling pay-per-mile insurance policies since 2011.

Metromile’s Pulse plug-in device tracks only your mileage; it doesn’t monitor your driving behavior. While traditional data such as your vehicle make and model, your age and driving history, and your credit score determine your base rate, your actual mileage is multiplied by a cost-per-mile fee.

As far as savings, here’s an example. For a 30-year-old with a clean driving record, your base rate will be less than $50 a month, and each mile is a few pennies, say 5 cents. If you drive 500 miles a month, your monthly premium would be $65, so your annual total would be $780.

If you haven’t checked out Metromile in a while because of so-so reviews, look into them if you reside in one of the states in which it is available. The company originally used National General Insurance to underwrite its policies and service claims. Based on user reviews, in 2016 they started handling policies and the claims process internally.

Root Insurance

This Columbus, Ohio based, fast-growing usage-based auto insurance business startup came on the scene in 2015, and it also offers renters and homeowners insurance. It’s currently available in 28 states.

Root tracks your driving habits as well as your mileage via a mobile app and only insures safe drivers. It takes about three weeks to know if you have qualified. Once you pass the test drive, Root assures you will save hundreds of dollars in auto insurance. The pricing comes out to about the same as Metromile.

Telematics Could Benefit You

So if you’re part of the trend of driving less, and you’re a pretty good driver, why not give telematics a try?

Karen Condor is an insurance expert who writes and researches for the auto insurance comparison site, 4AutoInsuranceQuote.com.

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