Will insurers pay you not to speed?

11:00 AM Insurers, speed No Comments

New monitoring technology is creating methods for increasing highway safety. That could lead to cheaper coverage for motorists.

Would you speed if you were paid not to?

That's the thrust of a study by the National Highway Traffic Safety Administration (NHTSA) showing that motorists followed speed limits when offered financial perks.

The study, conducted by researchers from Old Dominion University in Virginia and Western Michigan University, focused on 50 people who drove cars equipped with GPS trackers designed to monitor speed. Drivers who didn't go over the limit received $25 each week.

But motorists who drove 5 to 8 mph too fast were penalized three cents each time. If they went 9 mph or more above the limit, the penalty doubled to six cents.

"This had a robust effect in getting drivers to reduce their speeding," says Ian Reagan, the study's lead researcher and now a senior researcher for the Insurance Institute for Highway Safety (IIHS). "Egregious speeding, driving 9 or more mph over the limit, was just about eliminated for those that had the incentive" not to speed.

The study sheds more light on intelligent speed adaptation (ISA) systems that determine if someone is speeding by using GPS to link a vehicle's position to digital maps that include local speed limits. In addition to GPS, some newer systems also use cameras to read speed signs.

The ISAs, according to a recent report from the IIHS and the Highway Loss Data Institute, could warn drivers that they're going too fast or even automatically slow the car.

Typically, ISAs notify drivers of speeding using one of the following:

An audible or visual alert telling the driver to slow down.A haptic alert via the accelerator that makes it increasingly more difficult for the driver to depress the pedal.Reducing engine throttle to automatically decelerate a vehicle.
Right now, ISA technology is being tested, but such systems are not yet in use in the United States.

Insurers should consider rewarding policyholders if they obey speed limits, which would reduce traffic accidents, deaths and injuries, and the resulting auto claims and health coverage costs, says James Bliss, an Old Dominion University professor and one of the NHTSA study's key researchers.

It's too soon to tell if insurers would adopt such a plan, and if they did, how it would work. One option could be predetermined bonuses to drivers who don't speed, similar to Allstate's "Safe Driving Bonus Check" of up to 5% of premiums for every six months of accident-free driving.

Another option could be a discount on premiums, similar to the way pay-as-you-go, or usage-based insurance, policies work. While pay-as-you-go (PAYG) depends on drivers plugging a device into their cars to monitor performance, ISA technology in the future would likely be installed in new model cars as a standard crash-avoidance feature. Drivers would likely use either ISA technology or a usage-based system, but not both, because both monitor speed.

The study's results do seem to mirror the pay-as-you-go model, a hot trend in the auto insurance industry. Under PAYG, insurers give qualifying motorists premium discounts -- as much as 30% to 40% in some cases -- by installing devices in their cars that track driving habits and mileage. The safer and less you drive, the bigger the discount, according to insurers.

PAYG is clearly gaining traction, but it does have critics. Privacy advocates question how the information will be used, and some participants have complained that brake monitoring is too sensitive, reducing the amount of their promised discount.

Here's a look at what three of the major insurers offer:

Progressive's Snapshot: The way it works is typical; you plug in the device, which then tracks time of day and vehicle speed, miles driven and how often you brake hard. Richard Hutchinson, the company's general manager of usage-based insurance, says savings could reach 30% for the most conscientious motorists. The device must be installed for at least 30 days to create a driving profile.State Farm's Drive Safe & Save and In-Drive: Drive Safe & Save requires an OnStar subscription. State Farm receives odometer readings from OnStar every 30 days and, after six months, adjusts your premium to reflect the mileage. The company says discounts usually range from 10% to 50%. The insurer also offers In-Drive, which requires a plug-in to track time of day and vehicle speed, miles driven and how often you brake hard. Discounts can reach 30%, according to State Farm.Allstate's Drive Wise: A plug-in device records the usual motoring statistics, which are used to determine if customers qualify for a 10% discount for the first policy term. If drivers maintain safe motoring habits and low mileage during subsequent terms, savings can go as high as 30%, the company says.
Other insurers with some version of PAYG include The Hartford, Travelers, Esurance, Safeco and GMAC Insurance.

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Insurer's 'looking glass' into homes

7:30 AM glass, homes, Insurers, looking No Comments

| By Ed Leefeldt, Insure.com

A new insurance industry innovation -- a data recorder for homes -- is raising questions about privacy and efficiency.

Would you let your home insurance company monitor your house?

Last fall, United Services Automobile Association (USAA), the country's leading auto, home and life insurer for military personnel, received a patent for a data recorder that can be installed in a home for observation.

USAA's device will record conditions that "have led to damage or destruction of the building" or to "forecast the possibility of future damage or destruction."

The device can track the temperature, wind speed and mechanical vibrations as they affect the house, as well as humidity, which could cause mold in the walls.

Sounds like a good idea? Yes, for the insurance company, but not necessarily for the homeowner.

A home data recorder isn't a new concept. Companies like ADT and Tyco already provide sophisticated electronic sensor technologies to remotely monitor almost everything that happens in a house or office, including vibrations that could indicate a break-in. But USAA's device offers increased leverage for the folks at the insurance company by giving them a looking glass into your house.

Based in San Antonio, privately held USAA is owned by its policyholders and did not want to discuss its new product. Spokesperson Rebecca Hirsch said USAA would talk only about its innovation efforts in general, and not this patent in particular.

Neither the Property Casualty Insurers Association of America nor the American Insurance Association, both of which represent property-casualty insurers, would comment either.

Robert Hartwig, president of the Insurance Information Institute, which also represents the industry, said that even though he hadn't heard of the product, "it sounds like telematics for homes." But he did predict that "this device will aid insurers in underwriting property."

Telematics devices are plugged into cars and offered by auto insurers such as Progressive, which calls its on-board monitoring system Snapshot. This monitoring device records people's driving habits: distance driven, time of day, amount of times the brake is used and how hard. Driving at night when fewer cars are on the road usually lowers rates, as does avoiding the start-stop braking that can lead to accidents.

This invaluable information is used to price "pay as you drive" or "usage-based" auto insurance policies.

Consumer advocates agree that this could be a boon for home insurance companies. "By utilizing tools like this . . . insurers can better manage their risk exposure," says Birny Birnbaum, executive director of the Center for Economic Justice in Austin, Texas.

But insurers could also use that data to make decisions on policyholder claims and underwriting, as well as other decisions.

"The recent history of insurers' use of data mining indicates that insurers are using these new technologies to simply exclude certain risk exposure," says Birnbaum. In simple terms: If the insurer detects high winds around your house, it might cancel the policy.

Robert Hunter, the director of insurance for the Consumer Federation of America, is also suspicious. "Insurers have been using more and more black boxes [technology which is only understood by insurers] to systematically underpay claims," he says.

USAA's data recorder might have helped insurers expedite claim payouts after Hurricane Katrina in 2005. At a cost of $110 billion it is the most expensive storm in history.

There was constant wrangling between insurers and policyholders across the Southeast, from Florida to Louisiana, as to whether Katrina's 125-mile per hour winds had knocked down coastal homes or whether they had actually been flattened by the 30-foot tidal surge. If the cause was wind, then home insurers such as USAA would be responsible for claims. If the cause was water, then the federal flood insurance program would have to pay those with flood policies.

Consumer groups say that it's hard to find a benefit for homeowners who install a home-data recorder like USAA's unless, like Progressive's Snapshot program for usage-based auto insurance, the insurer offers a discount to those who accept. In which case, "this technology offers the promise of insurers moving towards a greater partnership with consumers to promote loss prevention," says Birnbaum.

For example, if a homeowner was advised to lower the humidity after an event such as a flood, he or she could save their walls, flooring and even prevent illness caused by inhaling mold spores. But this would require communication between the insurer, which needs to monitor the device regularly, and the homeowner. Otherwise, it is similar to the black box in an airplane, which can only tell investigators why the plane crashed after the fact.

Consumer advocates warn that homeowners should be wary of devices that monitor you or your property without any benefit to you.

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