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-   -   My tryst with Usage Based Insurance - Progressive's telematics device, Snapshot (https://www.team-bhp.com/forum/indian-car-loans-insurance/167654-my-tryst-usage-based-insurance-progressives-telematics-device-snapshot.html)

Background

I am a hard-boiled Property & Casualty Insurance Consultant. Please bear with my pedantic writing on this topic to start with!
stupid:

Usage Based Insurance (UBI) has existed for a long time. Self-reporting policies are a form of UBI too; the kind where you declare to the Insurer while taking out a quote initially that you would drive, say, 12,000 or only 6,000 miles a year and the nature of usage is for Office commutes/Leisure/School etc. You get to control your premium by the self-reporting. Of course, you could always lie and under-represent your actual usage or state you would only use it for leisure and then use it for commutes, and then when you submit a claim the Insurer would deny it stating that you had lied at the start about the actual usage.

The number of miles driven per year and nature of usage are primary factors used in fixing your rate. They play a huge role, needless to say, in arriving at your final premiums. The more you drive, the more risky you are for the insurer to insure you. Likewise, office commuting is the riskier exposure when compared to leisurely usage.

The other major primary rating factors are - your garaging zip code, age, marital status etc.

Telematics technology has given a new lease of life to UBI of late. On a live basis, telematics enables insurers to track the following-

• How you drive (lateral 'G' forces, braking forces etc.),
• How fast you are driving,
• Time of the day when you drive,
• In some cases, your location at any given time
• Duration of each trip etc.

How Telematics works
There are four major ways of making telematics tech work for insurers and you:

1. A dongle that plugs into the OBD port- I used just such a device provided by Progressive. This is the most prevalent device in the US market today. This device would have a SIM card in it through which data would be relayed to the insurer on a live basis via a telecom network. Needless to say, insurers are relying on major telecom providers such as Hughes Telecom/Verizon currently.
   The significant points to consider here are:
   1. According to a White Paper by the National Association of Insurance Commissioners on Telematics technology, OBD plug-in devices will become obsolete in a few years (3-5 years maybe?)
   2. A single insurance customer may generate around 150MB of data a month according to Industry sources. Telecom providers charge the insurers a fixed rate per MB (price unknown) and then, each device costs ~$40 for the insurers. Then they need to store and analyze Petabytes of data. They would need to breakeven by overcoming maybe $50-$70 per customer.
   3. Addendum to point 2 above, how do they breakeven when premiums go down because a person like me can get a full 30% premium discount? This is a complex calculation indeed, taking into consideration the lack of actual crashes from a "safe" customer. Interesting.
2. A Blackbox that is fitted in the engine-bay - State Farm Insurance offers this as an option, I have heard. This is supposed to be tamper-proof compared to the OBD dongle. Everything works the same way as with the former device.
3. Via smartphone apps - In the Japanese and European markets, I hear that Telematics apps on customers' smart-phones is a roaring success. Breakeven becomes very easy for the insurers. All trends point to this model taking off in the USA eventually. If you think about it, Smartphones come loaded with all kinds of sensors & technology, and it makes sense for the insurer to capitalize on this.
4. Via third party technology - GMC provides OnStar in its cars and State Farm insurance company already offers GMC car owners an option to relay data to State Farm via OnStar. This helps in breakeven too.

How it actually plays out for the customers
Just by signing up for a Telematics device, most insurers offer a small one-time sign-up discount. I guess this is to the tune of 5-10% in the industry. Then comes the actual part-

1. If you drive less, you pay less premiums. Pay as you drive/pay as you go.
2. If you brake hard, you pay more/don't get a discount. This is measured as an average of number of hard brakes per 100 miles.
3. If you turn hard and fast (causing high lateral 'G's), you pay more/don't get a discount.
4. If you drive in unearthly hours, most commonly between 12:00 midnight to 4 AM, you pay more/don't get a discount.
5. So far speeds and geo-location haven't been used to calculate premiums. But the day is not far off when insurers could rate you based on your speeds versus the legal speed limits where you were driving at different points in time.

Based on the above, most insurers offer you a monthly dashboard which you can login to their website and access. All the data and analyses, graphs etc. are made available. Also, some insurers re-rate you on a 30-day cycle based on these monthly reports. Some insurers make you wait an entire policy term and the discounts, if any, kick-in only at Renewal.

The highest and most common discount is 30%.

Progressive is said to be experimenting with punishing bad drivers based on the telematics data, but for the most part, you only stand to gain discounts or nothing as of today.

My experience with Progressive's 'Snapshot'

I was new to the States and was considered a 'Risky' driver with a mere 10 day driving experience (my experience in India notwithstanding). GEICO started me out with a $200/month premium for my used 2011 Nissan Rogue S in November 2013.

In 30 days, I switched to Progressive and the premium came down to $150/month. I also signed up for their Snapshot telematics device. I received it in a week and plugged it in the next day.

The factors Snapshot collects are:

1. Time of the day driven (12 midnight to 4AM being risky)
2. Speeds (with zero premium impact)
3. Hard braking
4. Number of miles driven
5. Duration of each trip (zero premium impact)

30 days after signing up with Progressive, I started receiving detailed dashboard reports and straightaway my premium dropped to $105/month. I got the full 30% discount because I drive maybe only a 100 miles a month in the winter and it was the winter. Even in Spring when i took my car on long roadtrips (longest being 500 miles one way), the premium stayed put. I also only averaged 0.5 hard-brakes/100 miles. (Yes, I am a good driver!)

I was very happy to prove myself to the insurance industry that I am not a 'Risky' driver. Telematics gave me the opportunity to actually prove myself and am proud of this to this day.

Not everyone gets the full 30% discount. Sheer driving indiscipline leading to hard-braking is the biggest reason why people don't get more than 10% discounts.

Meanwhile after 4 months' usage, they asked me to return the device ASAP or pay a $40 penalty. The UBI-Telematics discounts stayed on. But at Renewal, they jacked up the premium to $120/month since the one-time Snapshot sign-up discount no longer applied to me. I bade good-bye and returned to GEICO at $90/month and I have stayed with them since then.

Epilogue
Since you have come this far in this post, I should buy you a coffee.

Also, estimates say that Telematics will only explode further in the North American insurance/Auto industry in the next few years. Give it a shot if you can sometime in the future. It could be worth it*.

*Conditions apply

lol:

That's an interesting piece of news. Thanks for the detailed writeup on this subject. How do you think it would impact the Indian auto insurance market, where there are annual premiums to be paid and the only factors considered are the WDV of the vehicle?

I am really glad you asked this question.

This is not going to impact the Indian auto insurance market in the near future. Right now, just implementing existing traffic/motoring laws is an unmet challenge in India. And then, we don't even have a unique identity for our citizens. Driving licenses issued by RTOs are mostly not authentic and hence there is no possibility to build a national database of driving records. In the absence of all these hygiene factors, one could say that telematics is a long way away in India.

Another way of looking at it is - what if Indian insurers leap-frogged to Telematics technology directly and charged premiums based on usage? Maybe we won't still have Driving records and stuff, but nothing stops the Indian insurance industry from picking this up. Of course, they would need to invest heavily in building core Big Data competencies.

Fantastic thread! Thanks for sharing this with us. I wasn't aware of such a concept.

Why so? I thought office commuting would be safer (fixed route, road familiarity, slow speeds in rush hour traffic).

You bet! Exactly what I was thinking when reading the first list in your post. Whoever is making this device better brace up for game-changers. A nice App from the insurance company could capture all this data off your smartphone. Data can then be uploaded whenever the user has a wi-fi connection (thus saving the insurance company data costs).

:thumbs up

Hahaha!

You know, while I see the value of this telematics approach, I think it'll be most useful only for fresh drivers who have yet to prove themselves.

For drivers who have years of experience, the best way to know whether he is safe or not would be his driving history (accidents, insurance claims, run-ins with the law etc.). I know some nincompoop drivers who wouldn't be caught by the telematics (i.e. they don't brake hard), yet they are awfully accident-prone.

On the other hand, I know some drivers who can drive enthusiastically, yet haven't been in a crash in decades.

Now, who would you rather insure?

It's been a decade since I insured a car outside of India, but I seem to remember that, in UK, usage and annual mileage were there on the proposal form for an ordinary policy.

India will get a nasty shock when our insurance companies start assessing the driver as well as the car, and rating accordingly. This particularly applies to the young, especially as they tend to be the ones who find it hard to accept that, statistically, they are among the most likely to have an accident.

Such a move should have a sobering effect, but, most likely, would just lead to a huge increase in uninsured driving. :Frustrati

Jagan,

Finally found the thread (=my rhythm seems to be normalizing=bad news still)!

I've always meant to ask you this but it slipped my mind everytime: did the personal tracking nature of this telematic system ever bother you ? Would you still recommend a telematics system over switching to a cheaper (local) insurer over time?

The reason I ask while I am bleeding on the high starter insurance from Geico ($220/month), I'm not sure if I would be entirely comfortable having personalized profiling bolted on !

What is an interesting way of insuring!
Just like hiring a self-rental car based on the usage, similarly the insurer also can be hired providing the usage data!
I have one question though: The usage pattern would vary over time, right? The daily office goer, suddenly can go on a 3000 mile road trip over a week right? And when back, probably he might go back to his previous pattern of daily 20 miles office use. In such cases, how the early calculated premiums would work? I mean, still the premiums are to be paid on an annual basis?
Increasing future premiums is one thing, but how can they deny claims based on this data?

@theMAG

220/Month - Unless you are in New York or Jersey parking on the roads, this rate is super high :).

Are you taking health coverage which your health insurance is covering already. If so, remove that.

The coverage has multiple levels of coverage. Manage them accordingly and secondly for 60 dollars there is a drivers certificate you can write online which will lover the insurance by some amount. (Safety driving course or something)

Look at each part of the insurance coverage and manage that accordingly. Your comprehensive will be super high based on the car and year of make. Take a wise judgement of potential to total or lose your car to thieves(Road parking vs garage, locality crime rate etc).

Also take a wise judgement on coverage. Do you think you will drive rash to cause an accident or do you think the accident (will be accidental in nature).

Also compare insurance and ask for discounts when moving insurance. Geico is what i use but they are costly. I pay almost similar because my wife is a new driver and we park on the roads facing the NY. Insurance rates are pretty high based on the car as well.

For my motorcycle, i didnt take comprehensive which was running close to 500 dollars and i basically have a safer place to store the bike with chains and locks. I save 500 dollars in that alone.


Regarding the progressive, new drivers almost always brake hard. Evidence is the amount of jerk you see everytime you brake. Experienced drivers almost always ease into breaking and avoid that jerk. Again based on the way my wife is driving i can say some of the savings for a new driver is very very low and the same savings is anyway covered by time on other insurance.

As GTO said, an experienced driver would want to enjoy the GForce like how i do :) and driving the car like an automated car on tracks makes it far more boring on roads.

Anyway i went with Geico because of ease of actual insurance claim by experience and by freinds recommendation.

It is. Unfortunately that seems to also be the going rate for first-time car owners around the area I live in New England, judging from similar experiences heard from other first-time owners. But more on that later - to prevent dilution of this thread!

About office commutes being unsafe in comparison - it's just plainly decades of crash statistics impacting Underwriting decisions. Even I can't quite put my finger on the reason, but drawing from my personal experiences, rush hour commute traffic is indeed the worst in the US. It's a different animal altogether. Drivers behave differently (in a riskier manner) i.e. It just is this way.

About the value proposition of Telematics - Braking forces and Lateral G forces are actually pretty good measures of how risky a driver is in America. Road conditions are optimal and traffic flows smoothly for the most part (at least in my state) and the major causes for collisions are mostly erratic drivers. In all other respects, a bad driver in the US gets normatively weeded out by the law (moving violations recorded, hits on the driving record, jacked up premiums etc.). In comparison in India, collisions can happen due to all kinds of reasons, with maybe a few cases likely to be the involved driver's genuine fault. With assorted Cattle, old ladies, cycles, motorcycles, potholes, broken down vehicles, poorly planned cities and roads and whatnot on the Indian roads, high lateral G forces and hard-brakes may actually make for a good driver!

lol:

Actually, now that I think about it, if we ever have Telematics in India, braking force and G forces should not at all be factored in. The plot thickens!

Wow - that' a very valid point actually. Without a way to implement the law (in this case, the legal necessity to have a bare-minimum insurance policy), our people will find ways to avoid these corrective mechanisms. Pay-as-you-drive may not work then. It's like I am forced to eat my own words from earlier on this thread! None of this would work in India after all...sheesh :Frustrati

Good to see that you were able to take time out sir!

The personal tracking is something we can't avoid in my opinion. For instance, take your browsing activities. Every click of our mouse is being tracked by at least 3-4 different data aggregators (Google analytics being chief among them). It's highly likely that there are analytics & marketing people (or just plain bots or pieces of code) profiling us based on our online activities as we speak. That doesn't stop us from browsing. On the other hand, telematics gives us the fighting chance to get the rightful Rate that we deserve while we get personally profiled. Plus, there was a case in the US recently where in a Criminal case/traffic violation case (can't remember), the defendant was acquitted in court because of the driving data Progressive furnished in response to a sub poena!

One-off usages that depart from one's regular behavior is usually overlooked by the insurance companies. But let's say I regularly have high usage but I lie to my insurer about it, I have essentially violated the "agreement in good faith" that is mentioned on my policy; all insurance policies have some elements of good faith built in. This is since they can't verify everything when they sell to you, they take some of your inputs in good faith. Their point in this case is that your premiums are fixed based on the usage, and if you misrepresent the usage for your benefit, they have every right to renege on their side of the insurance contract. It's like a "tit for tat" thing.

Even life insurance claims are denied regularly on the basis of such perceived violations. This particular industry is all about hard-knocks.

Mag only possesses a Learner's permit in CT where he is right now. That makes him a very risky driver in the insurers' eyes.
His car is also of a relatively newer year of manufacture. That means his collision coverage costs would be high.
And then, there is a major Underwriting question that every insurer poses when generating a quote - "Do you possess prior insurance?" People like Mag who are just starting out with owning a car in the US will answer this as "No". For this answer alone, the premiums will shoot up, no matter which insurer you approach. Nothing to be done about it; in fact insurers like Liberty Mutual charge $350/month for such folks and insurers like Travelers would decline such a quote! GEICO is alright for him right now. The smart thing to do is to jump ship after completing a month and I bet my beard that Mag will cut his premium by 30% in doing so.

And to your point on G forces, anyhow G forces are only being measured by one company so far - State Farm.

This is not entirely true as this device can be made to provide a lot more data than what is quoted above. Some of the things that you declare to a company for an insurance quote includes the distance travelled per day (appx), is it to work only on the weekdays (amounting to two trips a day), etc. These were based on good faith earlier but now with this device plugged in it can be monitored. Speed and your style of driving is another thing. You could be a rah driver and lucky for years but your risk is higher :)

BTW, P&C in the US is known as general insurance (GI) in the rest of the world.

Thank you for the thread :thumbs up.

:OT but reminds me of the movie Eagle Eye. Each and every movement of an individual will be monitored this way or the other in future. This may make the earth a lot safer, but humans will behave more like robots.

Here's a related Team-BHP discussion on this topic : LINK

Not sure if Indian insurers will give a discount for good driving habits, but they are sure to levy additional charges for bad driving habits. So we will pay the current premium + additional charges.

Also, who will decide the range of parameters that will decide whether the driving style qualifies as good driving. If it is the same insurance companies, then I'm worried.

Amen to all that!

Whether we like it or not, the Internet of Things (IoT) is inevitable. I figure, might as well make full use of it!

Just a sample - Anthem Health Insurance company in the US has begun tracking Fitness Wearables' data of their insureds to impact their health insurance premiums. It might even turn out to be good for the policyholders, because they will be forced to hit the gym or do whatever to keep the premiums down.

When it comes to levying charges on bad driving, we are yet to see what happens in the free market. Only Progressive in the USA is testing to see what happens when it penalizes bad drivers. Without legislation that makes telematics compulsory, it is highly likely that all bad drivers would then simply opt out of the programme.

And I believe that the insurance companies pitch their parameters to the State Insurance Commissioners in the USA. The state commissioners are reputed to be fair and they do protect the consumers. In India, I am guessing in a similar situation, insurers would pitch their ideas, parameters and rates to the Insurance Regulatory & Development Authority of India (IRDA). It can't be all that bad at the end for us, the customers.