Rethink Your Auto Insurance Options
Exciting transformations in mobility mean consumer driving habits are changing. Since 1983, the percentage of people with a driver’s license has steadily decreased among 16 to 44-year-olds. As more people look to ridesharing, public transportation and eventually self-driving vehicles, consumers should rethink their auto insurance needs and options.
Most states require individuals to purchase insurance coverage to drive legally. Auto insurance can be divided into two basic coverage areas: liability and property damage.
When shopping for auto insurance, premium quotations are a useful tool for comparison of different companies’ products. Two factors determine what you pay for auto insurance. The first factor is underwriting where insurance companies assess the risk associated with an applicant. The second factor is rating; the rating assigns a price based on what the insurer believes it will cost to assume the financial responsibility for the applicant’s potential claim.
As driving habits shift, a new consideration is usage-based insurance (UBI). UBI examines driving habits (miles driven, speed, time of day and other factors) to determine insurance costs. Less than half of Americans are aware of UBI as an option and about six percent are using the product. When offered UBI, 50 percent of consumers make the switch.
UBI is an innovation by auto insurers designed to better align driving behaviors with premium rates for auto insurance. Mileage and behavior-based measures are tracked using odometer readings or in-vehicle telecommunication devices (telematics). The basic idea of telematics auto insurance is that a driver's behavior is monitored directly while the vehicle is in use. These telematics devices measure a number of elements of interest to underwriters: miles driven; time of day; where the vehicle is driven (GPS); rapid acceleration; hard braking; hard cornering; and air bag deployment. The level of data collected generally reflects the technology employed and the policyholders' willingness to share personal data. The insurance company then assesses the data and charges insurance premiums accordingly.
Check Out DriveCheck
To help determine if UBI may be a fit for you, check out NAIC’s DriveCheck. The DriveCheck UBI Self-Assessment tool takes you through a few quick questions about driving habits while providing more information about how UBI works.
Next, discuss usage-based insurance with your insurance agent or insurer. If a provider doesn’t offer UBI, chances are they will in the future. Consumers interested in UBI can shop around to find an insurance company who can answer questions and provide a quote.
Usage-based insurance isn’t for everyone. However, all drivers should review their auto insurance policies from time to time. Check out these tips when re-evaluating insurance needs:
- If UBI isn’t for you, talk to your insurer to determine if there are other cost-saving opportunities. Discounts may be available for multiple vehicles, driver education courses, good student, safety devices, anti-theft devices, low mileage, good driver/renewal, auto/home package and dividends.
- If a friend or roommate borrows your car from time to time, talk to your agent or insurer to see if you are covered in case the borrower gets in an accident. Likely, the best option is for your friend to have his/her own car insurance to cover any damages.
- If you’ve given up driving altogether, there are still risks to consider. Before accepting a shared ride from a company like Uber or Lyft, know the extent to which you are protected in the event of an accident.
- Most ridesharing companies have liability policies to cover any passenger injuries. If you are injured while riding, report a claim with the driver’s insurer and the ridesharing company’s insurer.
- If you’re considering contracting as an Uber or Lyft driver, make sure you understand the insurance implications. Review these tips before you get behind the wheel.
In the course of your lifetime, an auto accident is bound to happen. When it does take some of the guesswork out of a tense situation, with NAIC's WreckCheck™. This free mobile app for iPhone® and Android® smartphones outlines what to do immediately following an accident and walks users through a step-by-step process to create their own accident report. The app directs them to capture photos and helps document and share only what is necessary to file an insurance claim. Users can even email their completed reports to themselves and their insurance agents.
No smartphone? Download a printable accident checklist and other tips for staying calm, safe and smart on the road.