Americans Jump on Usage-Based Auto Insurance for Discounts
A new study released by LexisNexis Risk Solutions revealed that Americans are becoming more aware of the usage-based insurance (UBI) option that allows drivers to receive discounts on their auto insurance. Based on this awareness, many are choosing to switch coverage types and even insurance companies to gain access to low-cost premiums.
What is Usage-Based Insurance (UBI)?
Usage-based insurance (UBI), also known as pay-as-you-drive (PAYD) is a form of auto insurance that allows drivers to pay for their coverage based on how they drive their vehicles during their coverage period.
This type of coverage contrasts traditional auto insurance, which examines various factors to choose a premium rate for a driver, including a driving record over the past 3-5 years, credit history, marital status, neighborhood and age.
Individuals who opt for UBI typically agree to use a telematics program operated by the insurance company to share when, how much and how their vehicles are driven. This information is stored and made available to the insurer who then reviews it to determine whether the driver is eligible for discounts on premiums.
When usage-based insurance options first came available, many drivers worried that using telematics programs would compromise their privacy. However, the new LexisNexis study reveals that Americans are becoming open to the idea of sharing driving information in exchange for a discount.
Usage-Based Auto Insurance Becomes Popular Option
LexisNexis Risk Solutions found that one in every three consumers is aware of UBI, which is triple the awareness from three years ago.
Many of the consumers who are aware of the coverage option are choosing to enroll into the program, according to the study. Discounts are the number one driver for usage-based insurance enrollment, with 50 percent of consumers likely to sign up for telematics in exchange for a 10-percent premium discount.
Another 36 percent of consumers are likely to even change carriers in exchange for the 10-percent discount.
But while consumers are opening up to the idea of telematics programs, the study found that 72 percent are likely to accept them if an insurer offers an automatic discount of 10 percent after the first six months of coverage.
Other factors that ease consumers into the usage-based insurance option include being able to opt out without penalty, choosing which information to provide to their insurer and having control over the amount paid.
Among the companies that dominate the usage-based insurance market are Progressive, Allstate and State Farm.
Image courtesy of Stuart Miles / FreeDigitalPhotos.net