What’s “usage-based insurance” all about?

You may have heard the term “usage based insurance” or UBI and wondered if it’s right for you. Essentially, UBI is technology called telematics that monitors your actual driving behavior and experience. It may be a device installed on your car or on your phone. It can measure many variables, including what, when, where, and how you drive. The collected data is used by insurers to help determine the cost of your insurance.

Expect to hear more and more about UBI. Today, availability is limited to some insurers and some states and it is a choice you make as a consumer. Expect it to continue growing as a mechanism for pricing auto insurance. It’s estimated that by 2020, about 70% of all insurers will use telematics, according to the National Association of Insurance Commissioners (NAIC).

For a good overview, NAIC offers a one page explainer: Understanding Usage-Based Insurance. Or if you’d like a deeper dive on the topic, you can read their trend report on Usage-Base Insurance and Telematics.

NAIC describes how UBI insurance premiums are determined vs how traditional premiums are determined:

“There are several variations of UBI including pay-as-you-drive, pay-how-you-drive, pay-as-you-go and distance-based insurance. These options are different from how insurers charge for traditional auto insurance. Traditional auto insurance relies on actuarial analysis of data including driving record, credit-based insurance score, personal characteristics, vehicle type, garage location and more. A UBI program adds individual driving behaviors as an additional rating factor.

UBI may have a direct impact on your premium as UBI programs associate costs with individual and current driving behaviors instead of relying on statistics based on past trends and events.”

By tracking data, good or infrequent drivers will pay less and frequent or higher risk drivers will pay more. It’s expected that this could yield significant benefits for businesses in managing fleets. In the one-page article linked above, NAIC discusses the pros and cons of this approach for individuals. One frequently cited downside is the issue of privacy – some drivers just don’t like the idea of being tracked; others worry that collected data could be shared with or sold to third parties. Many state regulators are monitoring the privacy issue and requiring disclosure of tracking practices and devices.

Right now, if you talk about telematics and insurance, it is primarily an issue for auto insurance. But expect that some practices may also make their way into home insurance too. While there are still some barriers to adoption there – privacy being one – “smart technologies” or “the Internet of Things” mean that more and more home systems will be able to be measured and tracked. For more on this, see Smartest house on the block: Home telematics and their window for insurers.

Don’t leave money on the table: Talk to your agent about auto insurance discounts

We’re all looking for bargains, and auto insurance is no different than anything else we buy. You should get enough coverage to protect yourself, but don’t want to pay more than you have to. To keep you auto insurance premiums low, first and foremost, be a safe driver and avoid moving violation tickets. Your past experience definitely affects your rates. It’s also important to maintain a good credit history.

Assuming you are a good driver, there are many discounts that you may qualify for. We’ve offered a list of common discounts but be aware that they aren’t all available in every state and not every insurance company offers the same discounts. The savings potential may be substantial enough to shop around among insurers. A good independent agent will be familiar with and suggest the best potential discounts, but you should be sure to ask- particularly if you have had some life change that affects your circumstances, which your agent may not know about unless you tell them.

Here are some of the most common auto insurance discounts

Low mileage: If you work at home, live in a city where you mostly take public transportation, or drive very little, you may be eligible for a low mileage auto discount. The threshold for low mileage may vary by state or insurer. Generally, under 5,000 miles qualifies for the best discounts, but some insurance companies may have low mileage discounts for up to 15,000 miles a year.

Multiple vehicles in one household. If your household is insuring more than one private passenger vehicle with the same insurance company, you may be eligible for a discount.

Bundling. An insurer may offer a substantial discount if you package or “bundle” more than one policy with them. Typically, this would include bundling your auto and your homeowners, condo or rental policy.

Senior discounts. According to research by the Insurance Institute for Highway Safety, senior have fewer auto accidents per capita than any other age group. If you’ve just turned 65 or just retired, ask your agent about senior discounts. Some insurers offer senior discounts at even lower age thresholds.

Driver training. Taking an approved defensive driving or auto safety course might qualify you for a discount. Typically, these discounts are available to students or seniors, but check with your agent.

Antitheft devices and safety technology. If you have alarm systems, GPS tracking systems, kill switches, disabling technology, or other anti-theft devices, talk to your insurance agent. Certain safety technologies may also earn a reduced rate. If you have anti-lock brakes, passive restraint systems like airbags, or other safety features, let your agent know.

Being a student with good grades. Ask about student discounts. Many states and many insurers make discounts available to student policyholders who maintain good grades.

Prepayments or paperless payments. If you pay for your insurance upfront rather than in installments, you might earn a savings. Some insurance companies also offer a discount for enrolling in automatic E-bill or automated electronic payments.

Loyalty discounts. Have you been with the same insurer for a number of years? Some will offer loyal customer discounts.

Membership discounts and affiliations. Check with your insurance agent to see if they are affiliated with any membership discounts, such as through AAA or AARP, or other affiliate organizations. Also, check to see if there are any discounts available for active members of the military.

How to avoid driving blind spots

“I didn’t even see it coming!” Most drivers have experienced a close call at one point or another when changing lanes, often due to blind spots. The National Highway Traffic Institute says that blind spots account for more than 800,000 vehicular accidents a year. Blind spots are the areas around our vehicle that we can’t clearly see either with our peripheral vision or by looking in our mirrors, most commonly to the left and right rear of our cars. These blind spots can be affected by many factors: how many visual obstructions there are in the vehicle itself, such us window pillars and headrests, or your height in the driver’s seat, which can affect your external visibility. Blind spots are no joke – they can be big enough to hide an entire vehicle from your view.

The usual prescription for minimizing blind spots is a two-step process: properly adjusting your mirrors and physically turning your head to check before changing lanes.

But the question is, how do you properly adjust mirrors? Most people adjust side mirrors so that they can see the right and left rear flanks of their vehicle, but safety experts are now telling us that this is wrong: The Society of Automotive Engineers says that we should adjust the mirrors further outward to create a greater arc of visibility and this will eliminate blind spots entirely. See more about their recommendation, along with a diagram at How To: Adjust Your Mirrors to Avoid Blind Spots.

This short video goes into more detail and demonstrates exactly how:

Crash avoidance technologies

Many new cars are equipped with sensor and alert technologies either for blind spot detection or lane change warning systems designed to aid us in crash avoidance. As with many other crash avoidance systems, the technologies are still fairly new but expect to see more in future years.You might talk to your local insurance agent about any auto insurance discounts that might be available for car safety technologies.

This short clip from CNET talks about how such systems work and what to look for if you are shopping for a car with this technology.

The high cost of alcohol-impaired driving

What happens to your wallet if you are convicted of driving under the influence (DUI) of alcohol? Financial penalties ae swift, severe, and can linger for a number of years. There are 42 states with an automatic license suspension on first offense, and the suspension can extend from 30 days to as much as a year, depending on the state.

You can look up your state’s impaired driving laws and penalties in this chart.

Here are some of the negative consequences of having a DUI conviction:

  • Your license could be suspended. 42 states have administrative license suspension on the first offense.
  • Your vehicle may be confiscated or impounded.
  • You may be required to participate in an ignition interlock program and pay for all associated costs. MADD estimates the cost of ignition interlock device installations at $70 to $150, plus a monthly fee of between $60 to $80.
  • You are flagged as a high risk driver and may require an SR-22 filing by your insurer. In violations that result in license suspension, SR-22 forms must be obtained from your insurer before a license can be reinstated. Essentially, it’s a red flag signifying that you are a high risk driver. State laws vary, but the average SR-22 spans three years.
  • You could be dropped by your insurer. At the very least, your auto insurance options are more limited.
  • You will pay higher insurance rates over a number of years.
  • You might be subject to alcohol exclusion laws. Currently, 37 states have laws that allow insurers to refuse payment of costs for treating drunk drivers’ injuries.

So far, we’ve only talked about the financial costs of a DUI violation. Impaired driving also puts you and others at a much greater risk of being injured or killed. According to the Centers for Disease Control (CDC), 9,967 people were killed in alcohol-impaired driving crashes in 2014, accounting for nearly one-third of the nation’s traffic-related deaths. That’s about 28 people every day, or one death every 53 minutes.

It’s vitally important to understand the effects of alcohol on driving. See the 6 stages of getting drunk. Your BAC (Blood Alcohol Count) is a measure of the amount of alcohol in your bloodstream. Check out the Blood Alcohol Concentration (BAC) Calculator to understand the impairment effects of drinking. There are also a variety of BAC gauging apps that you can get for your phone.

Our best advice? Line up a designated driver in advance or call a cab, an Uber or a Lyft. Impaired driving is not worth it, whatever measure you use!

2017 Top Auto Safety Picks from IIHS

The Insurance Institute for Highway Safety (IIHS) named 82 vehicles as 2017 Top Auto Safety Picks. Of those, 38 earned the Top Safety Pick+, which signifies that they earned good ratings in 5 crashworthiness tests, plus they earn an advanced or superior rating for front crash prevention.

Criteria for all awards include both crash protection and crash prevention so new technologies play a big role in safety. Automatic emergency braking systems are a prerequisite for earning the Top Safety Pick designation so more and more automakers are adding automatic emergency braking as a standard feature in new cars. Research shows that front or rear crashes are cut in half with automatic braking. Another recent criteria that IIHS has factored in to its picks are headlight performance. They added this after observing a wide variance in the effectiveness of headlights.

You can see a full list of Top Safety Picks by year.  This year, the release notes some of the list’s top performers:

Toyota/Lexus leads manufacturers with nine 2017 Top Safety Pick+ winners, including the updated Toyota Corolla, while Honda and its Acura division pick up five Top Safety Pick+ awards.
Among 2017 models, only seven are available with good-rated headlights. They are the Chevrolet Volt small car, Honda Ridgeline pickup, Hyundai Elantra small car, Hyundai Santa Fe midsize SUV, Subaru Legacy midsize car, Toyota Prius v midsize car and Volvo XC60 midsize luxury SUV.

To evaluate a vehicle’s crashworthiness, IIHS conducts five crash tests: moderate overlap front, small overlap front, side, roof strength and head restraints & seats. At the link, you can learn more about these tests and see videos.

Here are additional resources from IIHS that are worth consulting before you buy your next car: