10/18/07

Insurance Program Rewards Drivers Who Drive Less and Slower

ROSEVILLE, Minn. — An auto insurance program based around usage could spell cost-savings across the board and change the face of future policies. The program, which began in August and was in its testing phase at press time, rewards drivers who log fewer miles and drive slower than other motorists.

Progressive announced it would offer the discount plan to the first 5,000 vehicles registered at tripsense.progressive.com. Also known as TripSense, the program includes a free matchbox-sized module, or TripSensor™, that plugs into the on-board diagnostic (OBDII) port, located near the steering column in vehicles made in 1996 or later. OBDII ports are also used to read other types of vehicle information, like emissions data.

“Drivers who reduce their risk of being involved in an accident by driving less, driving during lower risk hours or driving slower will be rewarded in this discount program,” says Jim Haas, Minnesota auto insurance product manager for Progressive.

The testing phase is mainly focused on residential customers as Progressive takes a “wait and see” approach to offering it to all drivers nationwide, commercial fleets included, says Progressive Spokesperson William Perry.

“We are optimistic it will be successful,” he says. “If everything falls into place, we’d like to make it more widespread in other states.”

Each vehicle that registers receives an automatic 5-percent discount for the six-month premium period. Those who choose to upload driving data to Progressive via computer hookup will receive a 5-percent discount in subsequent policy periods.

The more significant savings, up to 20 percent, will occur when the insurance company interprets the driver’s data. For example, a usage discount of up to 15 percent will be offered based on how much and when the vehicle was driven, and another 5 percent will be added to or subtracted from the usage discount depending on how much time the vehicle was above or below 75 mph.

“Anything you can do to arrive at a more accurate and fairly priced product is the driving force behind what we’re trying to do,” adds Perry.

Also collected, but not a part of the discount, will be information regarding rapid acceleration and braking. Progressive plans to use this data for future accident prevention.

The data also will allow drivers the chance to view a day-by-day travel log, as well as anonymously compare how their driving habits stack up against those of other drivers.

“If you wanted to compare (your driving) to all males in your age group, you can compare it to other demographic groups, with all the other participants,” says Perry.

The reading devices are a customized version of modules made by Hayward, Calif.-based Davis Instruments Corp. The company also manufactures chips for fleet management, as well as specialized fleet management software, which keeps track of driver performance, vehicle usage and accidents.

Progressive embarked on a similar program in Texas in which a retrofitted Global Position System (GPS) and cellular technology were installed into vehicles to calculate discounts much like the company’s current pilot program. Conducted from 1998 to 2001, the GPS program was discontinued because of high costs and “complex installation logistics,” according to the company.

Perry says the current program will be much more cost-effective and has a better chance of survival. “(The GPS program) was cutting edge-technology back then. It was a big-ticket item; certainly more than people wanted to pay,” he adds. “People loved the idea, but the cost of installation and logistics were too great.”

By:Chris Miller
Aftermarket Business

The 6 Parts Of An Auto Insurance Policy

An auto insurance policy can contain 6 parts. Depending on the state in which you live, you may be required to purchase some, if not all, of these parts.

Bodily Injury Liability
Pays damages when other people are injured or killed in an incident involving your vehicle. This coverage is required in most states.

Property Damage Liability
Pays when you damage the property of others with your vehicle. This coverage is required in most states.

Personal Injury Protection (or Medical Payments Coverage)
Pays medical costs and other damages for injuries to you and your passengers. This coverage is required in some states, optional in others.

Collision Coverage
Pays for loss or damage to your vehicle from a collision with another vehicle or object, when you're at fault. States do not require this coverage. However, companies that loan you money to buy a car or agree to lease you a car, may require this coverage.

Comprehensive Coverage
Pays for loss or damage to your vehicle caused by fire, theft, vandalism, hail, windstorms, riots, falling objects, floods and certain other perils. States do not require this coverage. However, companies that loan you money to buy a car or agree to lease you a car, may require this coverage.

Uninsured Motorist Coverage
Pays for damages to you and your passengers when injury or death is caused by an uninsured, under-insured or hit-and-run motorist. It also pays for damage to your vehicle from a collision with another vehicle or object, when the uninsured motorist is at fault. This coverage is required in some states, optional in others.

How Are Auto Insurance Rates Calculated?

The primary factors impacting auto insurance rates are the 6 parts of an auto insurance policy. Rates are generally based on:

The coverage types you choose from among the 6.
The amounts of coverage in a specific part.
The amount of deductible you choose. In most cases, the higher the auto policy deductible, the lower the premium paid.
Several other factors impact auto insurance rates. You'll probably pay less if any of the following apply:

Your previous driving record does not include tickets, accidents and claims.

Your home address is outside an urban area where more accidents and thefts are likely to happen.

Your credit rating is high.

You are older than 25.

You are female.

You are married.

You own a make and model vehicle not prone to theft, or driven at higher speeds.

Auto Insurance Risk Selection

Auto insurance risk selection is the process by which vehicle insurers determine whether or not to insure an individual and what insurance premium to charge. Depending on the jurisdiction, the insurance premium can be either mandated by the government or determined by the insurance company in accordance to a framework of regulations set by the government. Often, the insurer will have more freedom to set the price on physical damage coverages than on mandatory liability coverages.

When the premium is not mandated by the government, it is usually derived from the calculations of an actuary based on statistical data. The premium can vary depending on many factors that are believed to have an impact on the expected cost of future claims.[1] Those factors can include the car characteristics, the coverage selected (deductible, limit, covered perils), the profile of the driver (age, gender, driving history) and the usage of the car (commute to work or not, predicted annual distance driven).

Contents
1 History
2 Telematic systems
3 Patented risk selection systems
4 References

History
Conventional methods [4] for determining costs of motor vehicle insurance involve gathering relevant historical data from a personal interview with, or a written application completed by, the applicant for the insurance and by referencing the applicant's public motor vehicle driving record that is maintained by a governmental agency, such as a Bureau of Motor Vehicles. Such data results in a classification of the applicant to a broad actuarial class for which insurance rates are assigned based upon the empirical experience of the insurer. Many factors are deemed relevant to such classification in a particular actuarial class or risk level, such as age, sex, marital status, location of residence and driving record.

The current system of insurance creates groupings of vehicles and drivers (actuarial classes) based on the following types of classifications.

Vehicle: Age; manufacturer, model; and value.
Driver: Age; sex; marital status; driving record (based on government reports), violations (citations); at fault accidents; and place of residence.
Coverage: Types of losses covered, liability, uninsured or underinsured motorist, comprehensive, and collision; liability limits; and deductibles.
The classifications, such as age, are further broken into actuarial classes, such as 21 to 24 year olds, to develop a unique vehicle insurance cost based on the specific combination of attributes for a particular risk. For example, the following information would produce a unique vehicle insurance cost:

Vehicle: Age - 7 years old; manufacturer, model - Ford, Explorer XLT; value $ 18,000
Driver: Age - 38 years old; gender - male; marital status - single; driving record (based on government reports) violations - 1 point (speeding); at fault accidents - 3 points (one at fault accident); place of residence 33619 (zip code)
Coverage: Types of losses covered; liability - yes; uninsured or underinsured - no; motorist comprehensive - yes; collision - yes; liability limits - $100,000/$300,000/$50,000; deductibles - $500/$500.
A change to any of this information might result in a different premium being charged if the change resulted in a different actuarial class or risk level for that variable. For instance, a change in the drivers' age from 38 to 39 may not result in a different actuarial class because 38 and 39 year old people may be in the same actuarial class. However, a change in driver age from 38 to 45 may result in a different premium because the records of the insurer indicate a difference in risk associated with those ages and, therefore, the age difference results in a change in actuarial class or assigned risk level.

Current insurance rating systems also provide discounts and surcharges for some types of use of the vehicle, equipment on the vehicle and type of driver. Common surcharges and discounts include:

Surcharges: Business use.
Discounts: Safety equipment on the vehicle airbags, and antilock brakes; theft control devices passive systems (e.g. The Club), and alarm system; and driver type - good student, and safe driver (accident free); group - senior drivers fleet drivers .

Telematic systems

Telematics Insurance System from AIOI patent application WO patent 2005083605Conventional rating systems are primarily based on past realized losses and the past record of other drivers with similar characteristics. More recently, telematic systems have been introduced whereby the actual driving performance of a given driver is monitored and communicated directly to the insurance company. The insurance company then assigns the driver to a risk class based on the monitored driving behavior. An individual, therefore, can be put into different risk classes from month to month depending upon how they drive. For example, a driver who drives long distance at high speed in one month might be placed into a high risk class for that month and pay a large premium. If the same driver drives for short distances at low speed the next month, however, then he or she might be placed into a lower risk class and charged a lower premium.

Norwich Union is currently offering a type of telematic auto insurance in the United Kingdom called Pay as You Drive. This system employs a combination global positioning system (GPS) and cell phone in a car to monitor driving performance and communicate risk factors to the insurance company. Drivers are offered a discount if they exhibit safe driving. Trials conducted by Norwich Union in 2005 have found that young drivers (18 to 23 year olds) signing up for telematic auto insurance have had a 20% lower accident rate than average.

TripSense Black BoxIn the United States, Progressive Corporation is offering a form of telematic auto insurance to residents of Minnesota called TripSenseTM. The TripSense system consists of a black box that the driver plugs into their car's OBD-II port. The black box monitors the mileage driven, speed, time of day and other parameters, but not the car's location. The user then checks the black box once a month on their home computer. The home computer tells them if they qualify for a discount. If they do, they can download the information to the insurance company and get the discount. If they don't they do not have to download the information.

Other insurance companies are offering telematic auto insurance products in Germany, South Africa, and Japan.

Patented risk selection systems
New risk selection methods may be patentable to a greater or lesser degree depending upon the patent laws of various countries. These patents are generally described as business method patents. The United States is fairly liberal in granting business method patents. Europe is fairly conservative.

Different forms of telematic auto insurance, for example, were independently invented and patented [6]by a major U.S. auto insurance company, Progressive Auto Insurance us patent 5797134 and a Spanish independent inventor, Salvador Minguijon Perez EU patent 700009. The Progressive patents cover the use of a cell phone and GPS to track movements of a car. The Perez patent covers monitoring the car's engine control computer to determine distance driven, speed, time of day, braking force, etc. Ironically, Progressive is developing the Perez technology in the US and Norwich Union is developing the Progressive technology for Europe under a license from Progressive. Progressive does not have to get a license to the Perez patent since it was never filed in the US.

From Wikipedia, the free encyclopedia

Picture of Car Accident



A car accident in Yate, near Bristol, England, in July 2004.
The car failed to stop when the articulated lorry stopped at a roundabout.
The car bonnet can be seen deep under the rear of the lorry.
There were no injuries.

Auto Insurance Program

An auto insurance program based around usage could spell cost-savings across the board and change the face of future policies. The program, which began in August and was in its testing phase at press time, rewards drivers who log fewer miles and drive slower than other motorists.

Progressive announced it would offer the discount plan to the first 5,000 vehicles registered at tripsense.progressive.com. Also known as TripSense, the program includes a free matchbox-sized module, or TripSensor™, that plugs into the on-board diagnostic (OBDII) port, located near the steering column in vehicles made in 1996 or later. OBDII ports are also used to read other types of vehicle information, like emissions data.

“Drivers who reduce their risk of being involved in an accident by driving less, driving during lower risk hours or driving slower will be rewarded in this discount program,” says Jim Haas, Minnesota auto insurance product manager for Progressive.

The testing phase is mainly focused on residential customers as Progressive takes a “wait and see” approach to offering it to all drivers nationwide, commercial fleets included, says Progressive Spokesperson William Perry.

“We are optimistic it will be successful,” he says. “If everything falls into place, we’d like to make it more widespread in other states.”

Each vehicle that registers receives an automatic 5-percent discount for the six-month premium period. Those who choose to upload driving data to Progressive via computer hookup will receive a 5-percent discount in subsequent policy periods.

The more significant savings, up to 20 percent, will occur when the insurance company interprets the driver’s data. For example, a usage discount of up to 15 percent will be offered based on how much and when the vehicle was driven, and another 5 percent will be added to or subtracted from the usage discount depending on how much time the vehicle was above or below 75 mph.

“Anything you can do to arrive at a more accurate and fairly priced product is the driving force behind what we’re trying to do,” adds Perry.

Also collected, but not a part of the discount, will be information regarding rapid acceleration and braking. Progressive plans to use this data for future accident prevention.

The data also will allow drivers the chance to view a day-by-day travel log, as well as anonymously compare how their driving habits stack up against those of other drivers.

“If you wanted to compare (your driving) to all males in your age group, you can compare it to other demographic groups, with all the other participants,” says Perry.

The reading devices are a customized version of modules made by Hayward, Calif.-based Davis Instruments Corp. The company also manufactures chips for fleet management, as well as specialized fleet management software, which keeps track of driver performance, vehicle usage and accidents.

Progressive embarked on a similar program in Texas in which a retrofitted Global Position System (GPS) and cellular technology were installed into vehicles to calculate discounts much like the company’s current pilot program. Conducted from 1998 to 2001, the GPS program was discontinued because of high costs and “complex installation logistics,” according to the company.

Perry says the current program will be much more cost-effective and has a better chance of survival. “(The GPS program) was cutting edge-technology back then. It was a big-ticket item; certainly more than people wanted to pay,” he adds. “People loved the idea, but the cost of installation and logistics were too great.”