2012
12.04

I recently received a letter in the mail from my automobile insurance company, State Farm, offering me an opportunity to save money on my car insurance. Here is the catch: Technology in the vehicle will tell my insurance company about my driving habits, and how I drive determines how much I save.

Certainly, the concept of UBI (usage-based insurance) isn’t a new one. State Farm first announced its partnership with Hughes Telematics to bring connected vehicle services to drivers in the summer of 2011 and debuted in Illinois that year. While I was aware of such services provided by State Farm, receiving the offer in my mailbox last month somehow made the opportunity more real for me.

That one piece of mail got me thinking about my options and if the program makes sense for my family. Naturally, my first inclination was to pull up the Website and do more research about the program.

This is what I gleaned: State Farm can collect basic information from OnStar, In-Drive (the aftermarket device manufactured in partnership with Hughes Telematics), or Ford’s SYNC communication to calculate discounts. OnStar-equipped vehicles are eligible for the OnStar program, while Ford SYNC-equipped vehicles are eligible for that program. Newer vehicles that are not equipped with those systems are eligible for the In-Drive program.

Since my vehicle is equipped with OnStar, this is the program I began researching. Looking specifically at the OnStar program, the only requirement is that I have an active OnStar subscription for my vehicle—which truthfully I don’t. If I did, I could simply enroll in State Farm’s Drive Safe & Save program.

With the information in hand, I can begin considering my options. For me, the thought of having State Farm looking over my shoulder—keeping an eye on my driving habits—isn’t nerve-racking at all. If it means I can save money, I’m in. However, will I ultimately save enough money on my car insurance to make up for the additional OnStar subscription expense? Of course, I will also begin reaping the benefits of OnStar, so that is a consideration.

Then there is always the question of will I actually save on my car insurance—and how much. State Farm says most customers see a premium reduction. However, there is the possibility for a premium increase if you are currently receiving a reduction for low estimated annual mileage and your vehicle is actually driven more than that.

While I am still on the fence, all this does have me thinking about who is adopting the systems in vehicles today. A recent study from Tiger.co.uk, an independent motor insurance comparison site, recently compared sales data from February to September 2012 and found younger drivers in the United Kingdom are increasingly taking out these policies. The results suggest concerns about Big Bother could be dissipating with the ability to save a buck.

Connected devices and M2M are becoming more prevalent in our everyday life, and I am excited to see motorists increasingly taking out these insurance policies. For anyone considering this type of policy, my suggestion is this: Don’t fear Big Brother, but rather do your homework to determine if usage-based insurance is right for you.

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