The Pros and Cons of Using Tracking Device to Lower Your Auto Insurance Rate
Advances in technology have allowed for tracking devices to be placed on your car for a variety of purposes. In the insurance industry, it allows providers to give individual rates based on performance and usage which will help you save up on costs if you hit the benchmark.
A telematics device is usually installed beneath the steering wheel of your car. It collects data such as your driving habits, the speed you drive in, how often (and how hard) you hit the brakes and how many miles you’ve driven. In turn, this information will be stored and shared with your insurance provider. While your insurance rate can depend on a lot of factors such as age, geography and credit score, your driving habits play a major role in your rate. There are many benefits to usage-based insurance (UBI) plans especially if you’re a defensive driver but this can have drawbacks in terms of privacy. We list the pros and cons of telematics-based insurance plans, so you know what you’re getting into before you make the major switch.
1. Significant savings
If you practice good driving habits and have not violated any road rules, your insurance provider will reward you by giving you a discount on your premiums. Telematics also gather real-time information on your driving habits so insurance providers wouldn’t have to go through past logs on your historical driving data.
2. Encourages better driving skills
Because your driving habits will be closely monitored by a telematics device, usage-based insurance policyholders will be encouraged to adopt safe driving habits and adhere to road rules. Speeding, running on red lights, taking sharp turns and braking hard more often than necessary are some of the driving habits that the device can pick up and use for evaluation. For the insurance company, this would mean lesser accident claims and expenses on repair and hospital costs.
3. Additional safety
The vehicle’s tracking device comes in handy in case of theft and accidents. Telematics can assist in accident investigations by providing necessary information on how the accident happened and its cause. It could also help insurance companies determine fraudulent claims. A tracking device can help teenage or amateur drivers monitor their driving habits which leads them to become better and more conscious ones.
4. Provides proof of safety driving
Age being a factor for insurance rates means that teens are the most expensive age group to insure. Because of their lack of driving experience, insurance providers consider them more prone to accidents consequently resulting in higher policy rates. Telematics give teens an opportunity to show insurance providers that they are eligible for discount by proving good performance behind the wheel.
1. Data and privacy concerns
A telematics device can collect various and extensive data on your driving habits and even your location. How your insurance company may use this data is an issue you would need to clarify first before you switch to usage-based insurance. Insurers such as State Farm, Allstar, and Progressive claim they will turn over their policyholders’ data to the authorities when requested.
Information regarding location is necessary for theft-tracking, road emergency services, and map services. The time spent behind the wheel and the car’s running speed can be given to authorities for legal purposes. Always check your state’s privacy laws to know your rights regarding the use of your data.
2. Expensive implementing costs
There are different devices that can record and transmit telematics data ranging from black box devices installed by experts to mobile apps. A vehicle tracking GPS device ranges from $19.95-$29.95 per month for every vehicle. The cost of telematics depends on the update interval of the devices or how often the device sends data to the server for the user to access. The more data you use, the higher you pay per month. Installing a device via a professional can cost $5 per month, or you can pay it upfront together with the device starting at $85.
3. Inaccurate reporting of information
Telematic devices record specific information but don’t take into consideration certain conditions such as weather, dirt roads or sharp curves. Some emergency, last-minute situations such as an unsupervised child suddenly running towards the road or a yellow light would result to drivers hitting the brakes hard. Telematic devices would report the action but not the situation itself which would give way to inaccurate risk assessment.