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Usage-Based Car Insurance and Telematics: 3 Common Myths

Freya Hyper

Highlights:

  • Today’s drivers are benefiting from auto policies tailored to their personal driving habits
  • Many want to know more about how usage-based insurance works
  • Some common misconceptions, or myths, are easily busted

The days of the “one-policy-fits-all” approach to auto insurance are ending as consumers seek coverage tailored to their specific driving habits. For many, usage-based insurance, also known as UBI, is a new concept. And consumers have questions about how the emerging technology may fit into their lives.

UBI is known by several names, most commonly telematics insurance.  There are several types of telematics insurance: pay-per-mile, pay-as-you-drive (PAYD) or pay-how-you-drive (PHYD). The best way to understand whether a UBI option is right for you is to talk to your insurance agent. In the meantime, here are answers to some frequently asked questions, as well as some common UBI myths that are easily busted.

What is usage-based car insurance?

UBI policies collect information about your driving habits to personalize insurance coverage based on how you drive.  Some UBI options are based on how safe you drive (SmartRide®), others on the number of miles you drive (SmartMiles®).

How is data collected?

After enrolling in a UBI plan, telematics data is captured using a mobile phone application or a small plug-in device installed in your vehicle. In the future, drivers of a newer car could enable their vehicle’s built-in technology to transmit the data for a more seamless customer experience. Common data types collected include miles driven, hard braking, fast acceleration and nighttime driving. What data is collected depends on the plan. When you participate in a UBI program, this information is securely shared with your insurance company.

How much can I save on car insurance?

Safe drivers can save up to 40{998ff540fe94a59c7c9828c4dd5223100610db67cea90947d11644c77e05f5f4} in Nationwide’s SmartRide® program.[1] The SmartMiles® pay-per-mile program is saving low-mileage drivers 25{998ff540fe94a59c7c9828c4dd5223100610db67cea90947d11644c77e05f5f4} on average compared to a traditional Nationwide policy, and they can also earn up to a 10{998ff540fe94a59c7c9828c4dd5223100610db67cea90947d11644c77e05f5f4} discount for safe driving.[2]

Myth #1: Customers can’t trust an insurance company with telematics data.

Busted: The data collected by Nationwide is used for insurance purposes and never sold to any third parties. Drivers can easily see their driving data through the app or online web portal. Insurance companies are using the data in UBI as a vital part of providing safe driving feedback or tracking the number of miles being driven. Nationwide takes members’ data security very seriously and uses security measures to protect their privacy.

Myth #2: The process to enroll or activate a UBI plan is too complex.

Busted: The enrollment process for these programs is actually very easy.  Plus, the discounts customers earn are automatically applied — and they can be significant. Currently, there are options to enroll with a mobile app or by installing a small device in the vehicle. It takes only a few moments to install the device, and most people can easily do it themselves without any special skills or tools. Watch this video on how to install the telematics device:

Myth #3: My driving data will be used to increase my rates.

Busted: The goal of telematics data is to help drivers learn to be safer — not to penalize them for unsafe driving. Nationwide won’t increase rates for simply participating in the SmartRide program. Every SmartRide participant receives a 10{998ff540fe94a59c7c9828c4dd5223100610db67cea90947d11644c77e05f5f4} initial discount for the first term while their driving is evaluated. Any discounts earned will be maintained for the life of the policy. Even in a worst-case scenario, drivers would still get the 10{998ff540fe94a59c7c9828c4dd5223100610db67cea90947d11644c77e05f5f4} initiation discount for their first term. If they don’t qualify for additional discounts because of unsafe driving habits, they just wouldn’t get a SmartRide discount at renewal.

To learn more about Nationwide’s telematics insurance, visit SmartRide® and SmartMiles® or contact your Insurance Agent.

 

[1] SmartRide program availability varies; program criteria differ in California. Stated discounts are approximations. Discounts do not apply to all coverage elements; actual savings vary by state, coverage selections, rating factors and policy changes. The enrollment discount applies during data collection; the final discount is calculated according to driving behavior and could be zero. The final discount applies at the next policy renewal and is subject to change based on actuarial support at subsequent renewals or with changes in drivers or vehicles on the policy.

[2] SmartMiles savings based on national data through February 2020. Program availability varies. SmartMiles includes a base premium plus a variable premium based on the coverages in force and the days and miles driven.

 

 

 

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