A new insurance program being adopted by more and more insurance providers are raising the hopes of drivers who drive significantly less than other motorists.
Called prepaid insurance by some insurers and behavior-based insurance by other companies, this particular scheme is attracting plenty of attention from American motorists.
At present, prepaid and behavior-based insurance programs are undergoing testing phases in several states including California, Nevada, and not Texas. Officials from the different states say that the new system would different benefits for car owners. State insurance officials in California say that the new system can drastically reduce the number of vehicles on the road, resulting in fewer accidents and fewer carbon dioxide emissions. California is the first state to allow providers to offer prepaid insurance.
Nevada followed suit soon after and is now holding tests and trial periods to determine if the insurance scheme will become permanent.
Industry experts say that by installing monitoring devices in the policyholders’ cars, insurance companies can observe the driving habits and behaviors of drivers. The motorists’ driving habits will then determine whether their rates will increase or be reduced.
Behavior-based insurance is relatively new to many Americans. Analysts say that the installed devices will keep track of how a driver speeds up and slows down. Sudden accelerations and hard brakes can indicate recklessness. Behaviors like those can mean higher premiums for erring drivers.
The monitoring equipment will also keep record of how many miles policyholders drive. According to industry sources, motorists who rarely drive long distances can benefit from lower rates. Motorists who also avoid driving frequently can also avail of more affordable premiums.
The majority of drivers who have opted for the new insurance scheme say that privacy is not an issue because the monitoring devices are do not GPS-capable. Experts say that while the equipment can inform companies when the vehicle’s engine starts, insurers will have no way to determine the location of the car.
Some insurance providers are also offering prepaid insurance to their clients. Car owners and drivers can pay for a specified number of miles to receive coverage. They can always choose to buy more miles if they think they will exceed their purchased miles. Sources from the car insurance industry say that with prepaid insurance, motorists can have better control over how much they are spending for insurance.
In the past, companies relied on odometer readings and self-reporting to compute rates. This time, however, devices will also be installed to monitor the total mileage driven by policyholders.