In the face of rising auto insurance premiums, insurance companies have been responding with potentially cheaper, pay-as-you-drive plans that, for billing purposes, track when, how, how much and where drivers use their vehicles instead of basing rates on statistics and past trends, The Detroit News reports. The practice isn't yet mainstream, but the National Association of Insurance Commissioners predicts 20 percent of insurance plans will be pay-as-you-go in five years; right now they account for less than one percent. But privacy concerns already are being raised due to the GPS tracking that's required for this type of insurance.

Let's get the good parts out of the way first. A survey by Lynx Research Consulting reportedly found that over 33 percent of drivers would consider signing up for a pay-as-you-drive plan, which analysts say can save them five to 30 percent on insurance premiums. That's pretty lucrative when one considers the average premium rose 35 percent from 2012 to 2013, according to J.D. Power & Associates. The savings are realized because pay-as-you-drive plans "can better fit a driver to their risk profile," says Ash Hassib, senior vice president and general manager of auto insurance at LexisNexis.

But there are drawbacks. While cars with General Motors' OnStar service and Ford's Sync can use those systems to transmit driving data to insurance companies, vehicles that don't have GPS-based computers standard need to have GPS-based tracking devices retrofitted to their vehicles. Not only are some people worried about insurance companies watching their every move while driving - depending on the plan, providers can penalize drivers for when and where they drive their car - but the black box-like devices are somewhat expensive at over $100 a pop. Customers also have to pay a few bucks every month to have data transmitted to their insurance providers.

It's almost inevitable that new cars all will come equipped with GPS-based tracking devices in the foreseeable future, so some of the issues with pay-as-you-drive insurance plans could go away. But all this talk just makes us love vintage cars even more...


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  • 47 Comments
      Jim R
      • 1 Year Ago
      I can see where this is going. "Why did my premium double?" "Well sir, according to our records you exceeded the speed limit seven times on Rt. 85 last week. The road has a 45 MPH speed limit and according to the GPS device in your car, you were traveling at 50, 48, 47, 49, 51, 50 and 53 miles per hour in each instance. We consider that unsafe driving behavior, so we have adjusted your rate accordingly. Have a nice day!"
        davebo357
        • 1 Year Ago
        @Jim R
        Agreed. On the one hand I thought this system might be beneficial for my secondary car which is a Corvette since I don't put that many miles on it. However the type of miles I do put on it are not the kind of miles I'd want them tracking and charging me for based on legality. But hey they're an insurance company and this is America so they'll do whatever they can to take as much money from people as possible. I can only hope the system doesn't catch on and dominate the market, but if blue-haired old ladies driving 10mph under the limit can save money on this plan and the rest of the country follows suite, I guess it'll just usher in autonomous cars that much faster :(
      canuckcharlie
      • 1 Year Ago
      Scam being further exploited
      Matt C
      • 1 Year Ago
      Whoa whoa. The article and everyone's comments here are confusing two related but different concepts: pay-as-you-drive (PAYD) and driving habit tracking. PAYD insurance is about billing you per mile of driving. Nothing more. I've read about it being implemented with GPS units but also odometer self-reporting with random spot-checking. With all the big brother aspects of habit-tracking taken out of the picture, PAYD schemes are something I can (and we all should be able to) really get behind. The insurance company can make a little more per unit of risk/liability and we all can have more incentive to walk, bike, take the subway or bus, for small trips and save the driving for when we actually get to DRIVE. Less cars on the road also means less road expansion and maintenance over the long run, which means less of your and my tax dollars going to that. Also variable PAYD insurance needn't mean you can't still opt for a fixed annual rate. It'd just be an option for some of us.
      Shiftright
      • 1 Year Ago
      No thanks.
      Polly Prissy Pants
      • 1 Year Ago
      Here's a tip: No company invests resources to figure out how they can make less money. For every dollar that Driver A saves, Driver B will be paying an extra 2. The scam is that every driver thinks they're Driver A.
      raughle1
      • 1 Year Ago
      Welcome to the free market. All private insurance systems eventually end up here: trying to put people into smaller and smaller risk buckets until you have some people paying very little and others paying astronomical sums. As an insurance co, if you don't play this game, your competitors will take all your lowest risk customers and leave you with the highest, eventually putting you out of business. This is good up to a point (if I'm a low risk driver of course I want to pay less!) but go too far and you end up negating the entire point of insurance, which is to pool losses and keep driving broadly affordable.
      Ronald Bryan
      • 1 Month Ago

      I wasn't aware of pay as you drive insurance. This is a really interesting idea. Is there any way I could participate without GPS installed in my car?  <a href='http://www.fayettevilleinsurancecenter.com/services.html' >http://www.fayettevilleinsurancecenter.com/services.html</a>

      sp33dklz
      • 1 Year Ago
      It's not that big of a deal. I plugged the Progressive monitor into my OBDII port of my commuter car for 6 months and got a 30% discount. The driving characteristics they looked at were how quick you break, how far you drive, and what times of day you drive. If you paranoid about using one, then don't. Me, I saved $150/year and couldn't be happier. If progressive wants to know how fast I drove, how many red lights I ran, how many people I flipped off, and how many babies I ran over, so be it. I returned it after the 6 month period, got my discount, and I can continue slaying roadkill while drifting down the freeway, drunk AF at 120mph, YOLO!
      Nukester
      • 1 Year Ago
      And the next step is to charge more if you don't install this tracking device. The "logic" being that what is the driver trying to hide? Are they driving like a lunatic and just haven't been caught? Why doesn't the NSA just send the info to the insurance companies? They certainly track every bowel movement we all take. License plate scans, red light cams and facial recognition all tell the NSA who, where and when we are places and what we are doing. Add that to email, Facebook, twitter and all phone conversations being monitored, there is nothing to hide. Privacy, what an antiquated and novel idea.
        • 1 Year Ago
        @Nukester
        [blocked]
          Shiftright
          • 1 Year Ago
          @Nukester: the scary invasion of privacy started on Bush W's watch. Don;t kid yourself that one President or party is any better than the other. Presidents come and go, Big Brother always stays
          Nukester
          • 1 Year Ago
          Do you really think so? Obama has increased surveillance of Americans, so much for the Democrat party. Give up your freedom and the government will protect you!!! (swallowing the red pill now)
      • 1 Year Ago
      [blocked]
      ChaosphereIX
      • 1 Year Ago
      love my setup: classic car insurance for my Alfa Romeo in the 3 seasons - pay about $200 a year full coverage. For the winter, I either bus or carpool. Works great and saves me thousands.
      ishmaelcrowley
      • 1 Year Ago
      I remember when auto insurance was optional if your car was paid off. Then legislatures said if we mandate insurance for everyone, rates will go down. Insurance was mandatory, and rates went up. Sound familiar?
        knightrider_6
        • 1 Year Ago
        @ishmaelcrowley
        @ishmaelcrowley The "mandatory" part of the insurance (liability) is still very cheap. I pay around $100 per year. It's the comprehensive coverage that makes insurance so expensive. For me that adds another $400-500 per year.
        • 1 Year Ago
        @ishmaelcrowley
        [blocked]
        Will
        • 1 Year Ago
        @ishmaelcrowley
        Varies from state to state but it certainly is optional, you are simply required to set aside funds in the event you damage property or injure someone. California requires drivers to have liability insurance, with a minimum of $15,000 in coverage for the injury or death of one person, $30,000 for more than one person, and $5,000 for property damage. In lieu of that, a California driver who doesn't want to buy car insurance can make a $35,000 cash deposit with the California Department of Motor Vehicles, post a surety bond for $35,000 or get a self-insurance certificate from the DMV.
          AcidTonic
          • 1 Year Ago
          @Will
          With some paying over $1600 per 6 months for sports cars.... this seems like the better deal over time.
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