Insurance companies are aggressively promoting the latest gizmo – a little device that you place on your car, provided for free by the insurance carrier – telling customers this is a great thing, it will save them money. Saving money these days? Of course, lots of people are listening. But should they be taking up these offers? Maybe not.
The insurance companies are for-profit companies and they want to keep claims down, because claims mean they have to pay money out of their pockets. Serious personal injury claims mean lots of money they may have to pay to claimants; wrongful death claims, even more.
So when insurance companies point to saving lives, remember that they’ve got their own bottom line in mind. This may be great news for their shareholders, but it may not be so great for you, their policy holder.
The Gizmo: Pay As You Drive or Pay As You Go Plans
Lots of companies are offering these programs, from Progressive to AAA. They send you a small, cute electronic device to plug into your car or minivan or SUV, and once installed, this gizmo records data for the insurance company. Lots of data: from how well or badly you use the brakes, to the amount of miles you drive each day, to how fast you drive, and what time of day you are driving your vehicle. After a set amount of time, the carrier will let you know if your premiums are going to benefit from the data that has been collected via the device.
The gizmo doesn’t guarantee a lower premium. The device collects a lot of information on your vehicle, and if it falls into certain categories, then you may be eligible for a discount. This is important to remember.
The insurance company will argue that these gizmos help them assess risk and they can give discounts (here’s the saving money part) to customers who are low-risk for filing a claim. For example, take two policyholders who drove a total of 5000 miles in 6 months: the one that drove 4800 of those miles in a single trip to take the kids to DisneyWorld over Spring Break is at lower risk than the driver who slowly built up that total in a daily commute on a heavily-trafficked interstate.
Sounds smart, but that’s not the whole story. By collecting information on how you drive, when you drive, and where you drive, the insurance company sure is getting lots of personal information on you.
Privacy? Not only are consumer groups concerned about how these gizmos may be violations of your basic privacy rights, now and in the future, but consider this: when a serious accident occurs, insurance adjusters appear on the scene to evaluate things – for the best interests of the insurance company.
Rest assured, the data collected by these gizmos is going to be used in the future by insurance companies not to lower premium costs but instead to try and deny coverage and forego paying out money on high dollar serious personal injury claims. Watch, this is going to happen.
Be careful out there.