Pay-as-you-drive insurance programs appeal for their low price, but a new study suggests that many Americans would not consider enrolling in one due to privacy concerns. According to the study, 51 percent of people surveyed said they would never consider enrolling in a pay-as-you-drive insurance program, up from 37 percent last year.
Related: By-the-Mile Car Insurance Targets Urban Drivers
The programs, like Metromile, are designed for urban drivers who drive less than 10,000 miles a year and claim to offer a 10-30 percent discount off annual premiums compared with a traditional flat-rate policy. Mileage is tracked via a device that plugs into your car; it captures the data and transmits it to the insurance company for tracking. Most people, however, aren’t willing to trade savings for privacy.
“It’s still a very small percentage of consumers involved in pay-as-you-drive. I think there’s still reluctance on the part of some drivers to have a GPS device installed in their cars that’s monitoring their driving habits,” Mike Barry, spokesman for the Insurance Information Institute, said in a statement.
The survey, conducted by Princeton Survey Research Associates International on behalf of insuranceQuotes.com, questioned 1,001 adults and found that most Americans don’t know how the systems work and are worried about information sharing.
- Of the respondents who would never consider signing up for pay-as-you-drive insurance, 26 percent said they don’t understand how it works. Many incorrectly think pay-as-you-drive programs monitor for drunken driving and driving in high-crime neighborhoods. Instead, the programs measure mileage, location, drive times, fuel economy and average speed data.
- Of the respondents who would never consider the insurance, 21 percent said their primary concern was sharing personal information.
- Millennial generation drivers are most interested in pay-as-you-drive plans. Forty-three percent of drivers between the ages of 18 and 29 said they would consider enrolling and only 36 percent of drivers between the ages of 50 and 64 indicated interest.
- Older drivers are the least interested; only 28 percent of respondents older than 65 said they would consider it.
One big misconception is that insurers can use the information they collect to raise rates; not so says Laura Adams, senior analyst for insuranceQuotes.com. Rather, companies use the information for discounts. “Many carriers give a premium discount in exchange for signing up for a pay-as-you-drive program and subsequently raise or lower the discount according to a driver’s mileage and performance,” she said in a statement.
It’s not just startups like Metromile offering pay-as-you-drive services. Many large nationwide insurers like Progressive, Allstate, State Farm and Liberty Mutual offer usage-based discounts. The programs aren’t going away, either. The National Association of Insurance Commissioners predicts that 20 percent of all U.S. auto insurance companies will incorporate some form of pay-as-you-drive program within the next five years.
Cars.com graphic by Paul Dolan