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Pay-As-You-Drive Car Insurance
Sipos writes "The BBC has a story about pay-as-you-drive car insurance. There is not that much detail about how it would work but it seems that a black box in your car monitors your position using GPS. This information is then reported to a insurance company computer which then works out which roads you used and then bills you accordingly. The article seems to suggest that this will make insurance cheaper. Surely this will only happen for people who drive on dangerous roads less than average, after all there are no less accidents as a result? It also makes no mention of the potential for abuse of privacy this could involve. Are people really prepared to let insurance companies track their every move to save money on car insurance?"
I'm already thinking of hacks... I wonder how hard it would be to spoof GPS signals? Of course, 5 cents worth of aluminum foil over the sensor would work, too. Only if they correlate their measure of distance versus the car's odometer would they know if the system had been duped.
They could also know if you were speeding on a certain stretch of road and up your premium accordingly. "We noticed that you failed to signal your intention to turn 18 times last month. Tsk tsk. Oh, and apparently you've been eating at McDonald's quite frequently, so we've increased your health and life insurance premiums, too."
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Well that sucks for me as I tend to always go above the speed limit. Sometimes a mile above, sometimes 20. I'm pretty sure they would be actively checking the way you drive and if you drive too fast, be prepared for some rate increases.
people will alter their behavior if they are being charged this way. Just as you will use less electricity if it is being metered rather than an "all you can eat" plan.
Why not? It makes perfect sense for people who use their car only every once-in-a-while. Why should they pay as much as someone who is commuting from LA to SF twice a week?
I think many people feel they've nothing to hide and would opt for this payment plan if it can save them significant amounts of money. And as long as it is voluntary (i.e. you can always go with a flat rate), I don't see a problem with it.
Based on my experience with insurance companies, I don't really expect to see them use this to lower premiums, just to raise them and have excuses to terminate policies.
A great example of the shadiness of insurance companies happened a few years ago in Washington State. The insurance companies lobbied heavily to limit driving privliges for those 16-18 (limited number of minors as passengers, restrictions on driving after dark and whatnot) citing studies saying that it'd reduce the accident rates by a significant margin, which it did. The problem is that they never adjusted the insurance rates downwards to reflect these lowered accident rates, effectively giving their profits a big boost.
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And what if they hold a minimum-wage job at McDonald's? You'd probably be waiting 500 years to get your money.
"...but our GPS log show that you were travelling at 56 mph moments before the accident. We're going to have to decline your claim..."
People don't seem to realise that an insurance company's sole purpose in existence is to NOT pay out on claims. Otherwise how do they increase their profits?! Anything that can help them reduce the percentage of claims that are paid out will be snapped up.
gadgetophile.com
People don't have a problem with their credit card companies tracking every cent they are spending, so why should they have problems with this?
Exactly. It leaves me wondering too, wouldn't the insurance companies be against this for the same reason the cable companies are against a la carte programming? Because the good subsidize the bad. Obviously they wouln't want to do this if the majority of people are going to save money as that would just decrease their revenue. Hence I think the "save money" thing is really just a ploy to implement a new system that would actually have the same effect (for most people) of increased rates. Thanks but no thanks.
meep
My wife and I were discussing a different take on this concept a couple of days ago, and came to agree that this kind of thing is a *bad idea*.
Our conversation was about health care premium reductions for opting out of "maternity" services. But I think the same arguments apply here. Basically, this kind of system defeats the core purpose of insurance; namely, to share risk.
There are times when charging more for a given behavior makes sense (eg quitting smoking) and times when it doesn't (eg driving in safer neighborhoods). Basically, given that people for the most part can't choose where they drive, this amounts to a violation of the risk sharing priciple. It doesn't drive down overall premiums, simply shifts those premiums to an unlucky subset, while getting others a break the didn't earn.
And of course, the system is designed to encourage safer driving, but we already have that in the form of accident reports and moving violations, which bring up your premium dramatically when you commit them.
I don't want to see a system where the rich folks get lower premiums due to driving in suburbs, while urban drivers get nailed. It leads to that insurer ending up with safer drivers overall (as the higher premiums for those in Compton drive them out of the insurance pool). In fact, in most cases such preferential insuring is actually illegal.
You can't accept only low-risk drivers as an insurer, because doing so breaks the risk-sharing concept that underlies the whole system.
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I'm surprised that in 35 posts no one has mentioned that pay-as-you-drive insurance would tend to decrease driving, and so would help reduce greenhouse gas emissions, global warming, and urban air pollution.
These would seem to be the major benefits of this
idea by far, in the grand scheme of things.
Also. There's no need to track everywhere the car
goes in Orwellian fashion. All you need is a new
design of tamper-proof odometer that can be read
once a year when you renew your insurance.
Where are we going and why are we in a handbasket?
So what if I'm a recent [legal] immigrant making $20,000/year and I accidentally hit a $100,000 Mercedes SUV, destroying my $3,000 '88 Ford Focus and inflicting $60,000 worth of damage onto your car? So because I crashed into a car, I am bound for the rest of my life to give up $3,000/year, thereby completely eradicating any sort of chance I had to become a productive member of society and raise children and send them to college who would then go on to be two more members of a productive and non-impoverished society? That's absolutely ridiculous.
The insurance companies WANT to know that information so they can root out and refuse coverage to the high-risk pool of drivers. That would allow them to reduce their risk, reduce their costs (reinsurers), and make a boat load of cash. The problem is that it SCREWS the high-risk group since they have to pay OUTRAGEOUS costs for insurance, and you end up with a hunk of people who are uninsured.
This is essentially what health care is dealing with right now. As costs and liability goes up and technology increases the ability of doctors to identify genetic predispositions and weaknesses, insurance companies are finding it more attractive AND possible to weed out the bad candidates and lower risks and costs.
This is one reason that, if I'm fairly certain somethings wrong with me, my first stop won't be a doctor. My first stop will be an insurance agent so I can get a policy. Then to a doctor where I give a false name and pay with cash to get a check-up. Then, if its something bad, I go to a network doctor once my coverage starts and get it taken care of. Pre-existing condition? I don't know what you mean doctor...
-rt
Auto insurance is a mandated purchase by the government, and controlled by a few large companies. Those squealing that the "free market" will prevent abuses either are willfully blind to or for some reason can't see the imbalance of power involved here--in no way could the automobile insurance market be considered a free market in any sense. Because insurance is a government required purchase, and because of the history of the insurance industry robbing the public, the industry is and hopefully will continue to be heavily regulated, which is the only hope of preventing this becoming mandatory except for the very rich who can afford large surcharges.
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