Auto insurance companies are increasingly offering drivers a tantalizing deal: Sharply lower rates in exchange for permission to install a device that tracks when, where, or how you drive.
More than a dozen insurers, seeking better ways to reward safe drivers and weed out riskier ones, are testing or marketing technologies to monitor driving habits, betting that customers are willing to give up privacy for the promise of lower bills. The companies have signed up 1.5 million US customers, according to industry analysts, and that total could easily rise into the tens of millions within the next five years.
“You are seeing the front wave of what can only be described as a momentous change,” said Robin Harbage of Towers Watson, a global consulting firm based in New York.
Local drivers are starting to take notice. Jeffrey Boyd faced high rates when he began shopping for auto insurance a few months ago because he only recently purchased a car — a green Ford Fusion — so he was previously uninsured. But Progressive gave him a chance to slice up to 30 percent off his annual $800 bill by installing a free, palm-sized gadgetto monitor his driving.
Boyd, 30, of South Boston, said he was initially wary, but Progressive assured him that the device didn’t have GPS to track his location. The device plugs into the car’s diagnostic system, logging the miles and time of day he drives, and how often he slams on the brakes. A wireless transmitter relays the data to Progressive.
Boyd, who takes the bus to work and typically drives only on weekends, could save as much as $240 a year. “It’s a significant savings,” he said.
Privacy advocates, however, worry that the proliferation of usage-based insurance could open up a Pandora’s box of concerns, possibly leading companies to require all customers to install monitoring devices to obtain insurance. Worse, some fear the devices could someday be equipped to track drivers’ every movement or eavesdrop on conversations — data that could eventually be sold or obtained by law enforcement authorities.
“People don’t like being tracked, especially if they don’t know who can get the data,” said Lee Tien, senior staff attorney for the Electronic Frontier Foundation, a digital-rights advocacy group based in San Francisco, which opposed efforts several years ago to allow insurance firms to use such devices in California. “There is no good insurance reason to change the status quo.”
Insurers, of course, have long consulted official government driving records — typically tacking on surcharges when customers rack up accidents, speeding tickets, or other infractions. But insurance executives say the new technology provides far more detailed information on how customers drive, enabling them to better assess risk, allowing them to offer deals to the safest drivers and sometimes snatch them away from rival insurers.
“It is the strongest driving predicator we have ever found,” said Richard Hutchinson, Progressive’s general manager of usage-based insurance. “That is why it is a big deal.”
Progressive uses its device, known as Snapshot, to confirm that customers drive less than average, seldom brake hard, and don’t drive between midnight and 4 a.m., when it is harder to see and drivers are more likely to be fatigued or intoxicated. Drivers don’t pay for the gadget, which costs the company roughly $75 to $100, and can try it for 30 days, even if they aren’t customers. Progressive said 70 percent of drivers who order the device qualify for some sort of discount, saving on average $150 a year.
The company already has launched the product in 42 states — including Massachusetts in February — and plans to expand into three more states by early next year. It has also signed up nearly 1 million customers, double what it had a year ago.
Several other insurers are offering devices similar to Progressive’s in other states. Like Progressive, Allstate offers a gadget that plugs into a car’s diagnostic system to monitor mileage, driving time, and braking behavior. But Allstate’s device also tracks when drivers exceed 80 miles per hour — faster than the top legal limit in three states where it markets the device: Arizona, Illinois, and Ohio.
Boston-based Liberty Mutual is also testing a monitoring device in three states, while its Safeco subsidiary is trying a variation on the product aimed at motorists with spotty driving histories. Safeco says the program gives customers with speeding tickets or other blemishes on their records a chance to prove they are safe drivers.
In Illinois and Utah, State Farm uses a wireless system that captures even more data, including mileage, acceleration, braking, speed of turns, time of day the car is driven, and speeding over 80 miles per hour. The device also tracks location of cars to make sure customers are garaging cars in the area listed on their applications.
State Farm says it doesn’t receive driver’s exact coordinates, only enough data to place drivers within 40 square miles. Theoretically, drivers can qualify for up to 50 percent discount, but 10 percent is average, a spokesman said.
In New Hampshire, Kristine Bell, an agent at Portsmouth Atlantic Insurance in Portsmouth, said a few dozen customers at her company have signed up for Progressive's monitoring device, but the program hasn’t been widely accepted yet.
Still, Bell said she decided to try the device herself four months ago because, as a driver in her 20s, she faced higher auto rates. So far, Bell said she’s earned a 9 percent discount, largely because she doesn’t drive much.
“I figured it was worth a shot,” said Bell. “Something is better than nothing.”