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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.
So what happens when I make a wrong turn in LA and end up in watts or compton, does my insurance skyrocket?
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.
Here is my idea. Pay as you go sex. If you last 3 minutes you pay for 3 minutes only.
If you smash into a tree, it's your own damn fault if you don't have insurance.
Dear government, please stop telling me how to spend my money.
Thank you.
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.
Are people really prepared to let insurance companies track their every move to save money on car insurance?
Since when has the general public made it a bpoint to care about their Privacy over Money? You think that the existing lack of privacy occured because the masses didn't have a choice, or were just lazy and took shortcuts allowed by corporations?
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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"...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.
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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
However, for some reason it seems highly unlikely that they would ever do it this way.
first rule: Companies exist to make profit. Making things cheaper doesn't mean more profit (only in special scenarios). The "cheaper" for some, will most likely result in a lot more expensive for others (and everything added up: a bigger profit for the company).
Second thought: Installing such things in each cars is going to cost money. How will such expenses make insurances cheaper?
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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?
A true pay as go or 'those who drive more pay more' concept would be to pay at the pump. The states should add .10 (or whatever) per gallon to go to Liability coverage for all that drive. No more uninsured motorists. No high fees for those that only drive 200 miles per month. It may sound a little socialist but you'd sure see those SUV sales give way to Hybrids.
Why don't they just take down the miles of the odometer
Some people do try that. However, odometers are designed in such a way that it obvious to see when the number has been reversed (the gears have assymmetric shaped teeth that allow the odometer to count upwards). Odometers which have been "clocked back" usually have numbers that are misaligned like certain styles of web page counter.
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Young drivers are usually saddled with -HUGE- ;-)
-annual- premiums, even if they don't drive
that much (unlikely, but - hey - with Internet
& other hacking activities eating up our time,
there's less left over for cruisin'...
Excellent idea, who's time has come...
ie, as soon as it becomes sufficiently
hack-proof to work... eg, with independent
checking stations installed, a one-City-only
policy could work (every time the car passes
an automatic toll-RFID station, it could
broadcast its ID & the number of KM's driven,
up to that point, which could be relayed to
the insurance company...)
There was some talk about this in California a few years ago, they wanted to bake the car insurance into the price of gas, so that everyone would automatically be covered. This would have solved the problem with uninsured drivers, as well as promote energy efficient cars - drive a gas guzzler, and you pay more for insurance too. Personally, I thought it was a great idea, but of course the insurance industry lobby shot that idea down real fast.
why don't we make it a public utility, like water? Well, we all know the answer to that (insurance companies are grotesquely profitable and corrupt). Still, it's painfully obvious if you live in America (not commenting on the rest of the Earth) that you must have a car. Our entire infrastructure is build around fast, personal transportation. If you must have a car, and you must have insurance, it becomes an essential service akin to electricity, water and the telephone. It becomes equally obvious that the government should be regulating fees charged by insurance companies to prevent gouging. In point of fact, Insurance companies should not be profitable (not counting individual employees' salaries of course). They ought to be a public service. Something we all need so we all pay into (excepting a few special cases, as might be the case with other public utilities). Such services are not part of the regular economy and have no business drawing a profit any more than the patent office does.
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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
If you had an accident while the black box was disabled, you certainly could not make a claim on it. You should just ride without insurance if you want to save some cash.
This sort of insurance is not for everyone. I am a bicycle commuter. I don't even own a car. If I can pay a few dollars every so often when I do get in a car it would be much cheaper than paying for a whole month.
I see this as being a possibility for rental cars too, but they already have day-to-day insurance for that.
This is how a market economy SHOULD work. Competition between insurance companies means that they will try to reduce their costs associated with each customer. They already have a good statistical model for which customers cost them how much money; as I understand it, red sportscars cost more to insure than a hatchback.
A system like this gives the company a much more accurate gauge of the risks associated with each customer: they can directly relate driving behaviors with claim pay-outs. A Volvo parked in the garage, and used once a week to do the shopping, should carry much lower premiums than the neighbour's luxury sedan that's in traffic 4 hours a day for commuting.
A flat rate insurance system means that safe drivers, or those who drive rarely, are subsidizing frequent drivers, and incompetent or risky drivers. While in the current system, good driving often gets you premium reduction, and a crash drives your premiums up, watching actual driver behavior lets the company directly correlate the premiums with the statistical risk of an accident.
If you want to drive around at 2AM within a few blocks of the local bars/nightclubs, and risk an accident with a drunk driver, you're free to do so... but the insurance company would rightfully bill you for taking that kind of chance.
And as for privacy, driving takes place in the public sphere: there really isn't any to begin with. But if you don't want your driving monitored, opt-out of the system. But don't expect everyone else to subsidize that decision.
So this system not only distributes the costs of insurance more accurately, it acts as economic incentive to drive safely.
Live simply, that others may simply live. -Gandhi
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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They had a blurb about this thing, and Progressive's plan to use it, on one of our local news radio stations. They were saying that the time you drive would be a major factor in your insurance premiums. I guess things like this are out of the question for anyone who works odd hours or is on call 24/7 for things that might require a drive to work.
"No, I can't come in and fix the server, it'll cost me a fortune on my car insurance."
5000rpm? Forget that? Get a dremel! 35000rpm! You're going to be crusing around at 5191.667mph for a grand total of 124600 miles per day.
Insurance companies are in for the profit same as anyone else. They have two ways to play the game: 1. Increase revenue -- which means raising rates -- in most cases, they're already squeezing the blood from people -- so not an option. 2. Reduce expenses -- which means coming up with new and innovative ways of not paying out. Enter technology! The use of technology to avoid paying insurance claims is not new. Most Americans driving newer cars already have black boxes that have already been successful in proving driver negligence and nullifying insurance coverage. This new technology just takes it to the next level. Instead of making the data available to the insurance company only after a crash -- they get the opportunity to know everything about your driving habits BEFORE. Does anyone really believe that the insurance companies WOULD NOT use this data to THEIR advantage? Most policies have a clause that completely removes the insurance coverage in the event the driver has broken the law. Proving you've been driving drunk was pretty easy -- but proving you ran a stop sign, or even a cross-walk was next to impossible -- until now. If you can say that you are a 'perfect driver' and have never ever made a driving error of any kind -- I'd like to meet you! (I've never met a god before either, but won't be holding my breath.) All this system will do is catalog your every transgression, and give the insurance company an easy way out of any attempt to get them to pay. "Judge, Joe Smith has violated the law 54 times in the past 2 years -- he has demonstrated a clear pattern of reckless driving -- why should our insurance company pay for this accident?"