March 21, 2011
Insurance Providers Offer "Pay-As-You-Drive" Programs as Rates Rise
In the wake of a stagnant job market and a snail-paced economic recovery, car insurance rates are once again on the rise, with Insure.com reporting that the national annual average is up $131.74 from the previous year. Drivers have faced particularly steep increases in Michigan, where the average yearly payment for a 40 year old male is $2,541 — nearly $1,000 more than the national estimated rate of $1,561. While analysts point to a variety of reasons for the current upward trend, the most obvious — and perhaps the most influential — factor is the growing number of uninsured motorists. Citing inability to afford the expenses of insuring a vehicle, uninsured drivers make up as much as a quarter of the auto-owning population in several states, contributing to a vicious cycle of increasing rates and a decreased capacity amongst the general public to keep up with the price hikes.
However, several car insurance carriers are working to reduce the number of uninsured drivers — and save customers money in the process. In California and a number of other states, companies like State Farm and AAA are offering "pay-as-you-go" programs that are meant to benefit drivers who don't spend a great amount of time behind the wheel. For those who log less than 19,000 miles on the road each year, this innovative new approach could save drivers between 1-10.5% on their car insurance annually.
Taking the "pay-as-you-go" model one step further, Progressive Insurance has implemented a new behavior-focused program dubbed Snapshot, which evaluates policyholders based on how, when and how often they drive. Drivers in the voluntary program are monitored via a small device that plugs into a car's onboard diagnostic computer (standard on all vehicles since 1996), which in turn sends real-time data to Progressive. Participating customers could save as much as 30% on their insurance after 30 days, with most receiving a discount of between 10 and 15%.
Although Progressive is working fiercely to guard its new technology from competitors, it only seems inevitable that we can expect to see more and more of the "pay-as-you-drive" model as car insurance premiums continue to rise.
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