Is it worth getting safe driving discounts?
In order to save on their car insurance premiums, which have been increasing, drivers are exploring options for discounts. Some insurers offer safe driving discounts that utilize telematics programs, also known as UBI, to monitor and assess your driving habits.
If you have been a responsible motorist, you could potentially see your rate decrease by up to 40%.
While discounts may be enticing, some companies may increase premiums if your driving habits are deemed risky. Privacy advocates are concerned about the potential misuse of the collected data. Hayley Tsukayama, associate director of legislative activism at the Electronic Frontier Foundation, emphasized the importance of consent. "It's all about clear communication," she said. "People get upset when their data is used in ways they don't expect. Maybe you are willing to make some trade-offs - it's all about clear communication."
Discover how safe driving discounts work, the potential savings, and the associated risks.
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How do safe driving apps work?
Real-time evaluation of day-to-day driving behavior allows insurance companies to offer discounts for good driving, which is not a new concept. They often lower rates for drivers who take a defensive driving class or who have not had an accident in several years.
Installing a plug-in device or downloading an app on your mobile phone is typically required when signing up for a safe driving discount. Some insurers may use data from both options.
These telematics devices, commonly plugged into a steering wheel port, monitor your car's performance using sensors and diagnostic systems.
Your smartphone app captures data about your driving speed, hard braking, and other behaviors using your phone's internal GPS and sensors. The apps analyze your phone's movements, such as how it rotates when you enter your vehicle, to determine if you're driving.
Your driving performance is monitored through various metrics.
- Time of day
- Mileage
- Location and route
- Speed
- Acceleration, braking and turning
- Phone usage while driving
There is no one-size-fits-all approach to maximizing the benefits of a UBI plan, as each insurer evaluates data differently. According to Progressive, certain driving behaviors, such as limiting hard braking and acceleration, avoiding handheld phone activity, and avoiding driving between midnight and 4 a.m., can help optimize the Snapshot program.
Which insurance companies have safe driving apps?
Some insurers provide discounts for allowing them to track your driving habits, but each state has unique rules regarding data usage, and some prohibit or restrict UBI programs.
Allstate, American Family, Farmers, Geico, Nationwide, Progressive, State Farm, Travelers, and USAA offer discounts of up to 30% off with their respective driving programs.
Can a safe driving app make my rate go up?
While State Farm and USAA stated that they do not raise premiums based on telematics data, Allstate, American Family, Farmers, and Travelers admitted that they may increase rates if the app deems you an unsafe driver.
Both Geico and Progressive did not respond to requests for comment, but their websites suggest that rate increases are possible. According to Progressive, 20% of drivers who enroll in its Snapshot program experience an increase in their insurance premiums.
Will my driving data be sold?
Your telematics information may be used for marketing purposes or shared with your insurer, even if a company doesn't sell or share your data. However, they may still be required by law to comply with subpoenas, court orders, or law enforcement requests.
Understanding an insurer's privacy policy can be challenging as it may not be clear what is being done with your personal information.
"Unfortunately, it requires a bit of effort as these agreements are not always straightforward."
Both State Farm and USAA nationwide confirmed to CNBC Select that they do not share or sell driving data to third parties.
CNBC Select was directed to Farmers Auto Insurance's privacy notice, which states that customer data from its Signal app may be shared with third parties, including "marketing companies and financial institutions with which we have joint marketing agreements."
Progressive's privacy statement states that it may share personally identifiable data from its Snapshot app with other companies for various purposes, including servicing insurance policies, detecting or preventing fraud, conducting research, marketing products and services, and as required or permitted by law. However, users have the option to limit some of the marketing of Progressive and affiliate products and services.
"Ensure that you are comfortable with your insurer reserving the right to sell your information to data brokers, as Tsukayama suggests. Perhaps you are willing to make some trade-offs. It all comes down to clear communication."
How accurate are safe driving apps?
Your car's or phone's sensors are not always accurate in detecting driving behavior, as they may incorrectly identify you as the driver when you were actually a passenger or register distracted driving when you were not behind the wheel.
According to J.D. Power, only 38% of customers who use safe-driving apps believe that the data collected is always accurate. Although most programs offer the option to request corrections, the process is time-consuming and the options are limited. For instance, Travelers Insurance allows Intellidrive users to update their trip information within 10 days of the trip, specifying whether they were a passenger or a driver.
How do I sign up for a safe driving discount?
To receive the safe driving discount, policyholders must enroll within the first few weeks of their policy's start date. The insurer monitors their driving behavior for the policy term (typically six or 12 months) and applies any discount at the next renewal.
To qualify, you must complete a certain number of trips within a specified time frame.
While the full discount is typically only available upon renewal, most companies provide a smaller discount for signing up. For instance, Nationwide offers a 10% discount on rates when you join its SmartRide program. At renewal, the overall discount can increase to as much as 40%.
Are safe driving apps worth it?
While using safe driver apps can lower your insurance rates, it's important to check with your insurer to avoid potential rate increases.
Is it worth allowing your insurance company to have access to that much data?
Tsukayama advised that if you want to keep certain information more private, you might say, "Oh no, this is not for me." The key is to understand what is being collected and use that knowledge to evaluate your comfort level with it. Ultimately, your decision should be informed.
"Ultimately, it's your data," she stated. "It doesn't belong to them. They may gather and retain it, but it's all about you."
Safe driving discount pros and cons
Pros
- Lower rates.
- Improved driving habits
Cons
- Your rates could increase.
- Your data may be sold.
More ways to save on car insurance
If you don't like using a safe driving app, there are other methods to reduce your insurance rates.
Shop for other discounts
Besides using safe driving apps or devices, there are other ways to save on car insurance. Some insurers offer discounts for bundling auto and home insurance, being a student with good grades, owning a home, or going paperless.
Increase your deductible
Raising your deductible by $300 could lower the cost of full coverage insurance by up to 30% annually. Ensure you have enough savings to cover any out-of-pocket expenses in the event of an accident.
Improve your credit
Your car insurance premiums are influenced by most states. To improve your credit, you can reduce debts, maintain low credit utilization, and use a service like CreditWise® from Capital One to monitor your credit report.
Meet our experts
We interviewed Hayley Tsukayama, an expert with specialized knowledge and authority in legislative activism, for this story at CNBC Select.
Why trust CNBC Select?
Our goal at CNBC Select is to deliver top-notch service journalism and in-depth consumer advice to our readers, enabling them to make well-informed decisions when it comes to their finances. Each of our car insurance articles is the result of thorough reporting by our team of expert writers and editors, who possess extensive knowledge of insurance products. At CNBC Select, we take pride in our journalistic standards and ethics, and we earn a commission from affiliate partners on many offers and links. However, our content is created independently by our team, without any input from our commercial team or external third parties.
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