Big Brother cutting insurance bills

While Progressive is first out of the gate in implementation of usage-based car insurance, there's a pack forming at the starting line. But some competitors may have an entirely different idea about how to run this race. Here's what some of the nation's other auto insurers say about their plans:

• Raleigh Floyd of Allstate says that in the company's tests of usage-based insurance, "our focus is the driver, and helping everyone improve their own awareness of their driving habits -- good or bad. We're looking at ways to make safer driving something everyone can achieve. Those safer drivers should also be able to save on their insurance."

Allstate is testing multiple devices and refining the feature and service combinations to best deliver safer driving.

"We are also looking beyond the devices to the way we shape out entire program -- everything from the way we share driving insight with our customers to the experience they have while driving," Floyd says. "We need to nail three things: engagement, enjoyment and peace of mind. If we keep the driver's experience at the center of everything we do, all the other pieces should fall into place."

Allstate won't speculate on a launch date -- or even say when testing began -- but "it feels like what's next," Floyd says. "Customers are happy to tell us what works and what doesn't. They will certainly shape what we deliver in the marketplace."

• Erie Insurance is conducting a test with 500 volunteers in Pennsylvania and Ohio. Erie is tracking speed, mileage, acceleration and braking. Results do not affect volunteers' premiums.

• The Hartford has completed a six-month usage-based test using policyholder volunteers in Connecticut. GPS devices were used to track mileage and other data. The company has not released results from the test.

• MileMeter sells auto insurance "by the mile" in Texas. Customers can purchase 1,000 to 6,000 miles of coverage during a six-month policy period and additional miles as needed. MileMeter doesn't use tracking devices in its customers' cars; instead, customers provide odometer readings and attest to their accuracy.

• State Farm is testing on a small scale in Oregon to determine the feasibility of usage-based insurance. Customers in the test have devices installed that track only mileage and are not paying usage-based rates.

Benefits beyond rates

Drivers participating in pay-as-you-drive car insurance have hit upon other advantages of the programs. Worters, of the Insurance Information Institute, observes that parents use the "black boxes" to track teens' driving habits and speeding.

If pay-as-you-drive insurance takes hold and drivers everywhere trim mileage in order to save money, it will ultimately benefit everyone. In a 2005 report, Todd Litman of the Victoria Transport Policy Institute wrote: "Reductions in total vehicle travel may provide proportionally larger reductions in total crash costs, since about 70 percent of crashes involve multiple vehicles, and the average crash results in about 1.5 claims.

"If your current mileage does not change but all other vehicles reduced their mileage by 10 percent, you could expect a 7 percent reduction in crash risk, since 70 percent of your crashes involve other vehicles. If you and all other vehicles reduce mileage by 10 percent, you could expect a 17 percent reduction in total crashes."

A June 2008 pay-as-you-drive report, also by Litman, states that the programs can reduce pollution and emissions: "If applied to all vehicles it will achieve approximately a third of the Kyoto emission reduction targets for private vehicles."

It's an attractive proposition. "Some states have asked if we'd launch in their state," Hutchinson says, particularly states concerned with miles traveled and greenhouse gases.

"More and more, acceptance is climbing," Hutchinson adds. "People view insurance as part of overall transportation costs, and they're looking for relief."

Updated May 14, 2009

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