I’ve got good news! Insurance companies have been listening to you! One of the biggest complaints I’ve heard over the last few years is this: why do I get penalized for other people’s bad driving? Everyone can see their auto rates climbing steadily. It doesn’t matter what type of auto insurance, who you have it with, big or small, new or old cars, you’ve noticed your rates are going up. And if you’re one of the ones with no accidents and no tickets it can be infuriating to watch your rates go up even though it has nothing to do with you.
Understanding the Thin Margins of Auto Insurance
To start you need to understand auto insurance isn’t an industry where companies play around. They keep premiums at absolute minimums to try to be competitive. It’s a highly competitive, cutthroat market with razor thin margins. Most insurance companies are just trying to break even between premiums paid in and claims paid out in a year. Because of the thin margins, when they have more claims than premium rates go up to absorb the extra expense.
So What’s Caused the increased Cost in Auto Claims?
The reason is pretty simple. More people driving equals more accidents. And more expensive vehicles in wrecks also equals bigger payouts. The causes of the accidents are varied. Sure people just make mistakes, speed, run lights, etc. Distracted driving isn’t necessarily new either. People have been driving and eating, putting on makeup or playing with the radio for years.
The biggest change in the last few years is the smartphone. In fact, it’s so prevalent one local police officer told me his new first question at accidents is now, “were on your smartphone when the accident occurred?” Stop and think about it for a moment; how many people did you pass on today that were playing on their cell phone?
The smartphone has made us all dumber drivers and we’re all feeling the effects in higher premiums. We’ve all been guilty of texting while driving, checking Twitter or Facebook, right?
The Insurance Pool
The problem until recently for insurance companies is how to differentiate between good drivers in the exact same insurance pool? To give you a rating, insurance companies have to divide you up into pools based on similarities you have with other drivers. Age, driving record, zip code, city, state, gender, credit score, to name a few all play a factor in which pool you get placed into. But even in these pools of relatively similar people, there are good drivers and there are bad drivers based on driving habits.
A New Way to Measure Driving Habits: Enter the Smartphone
Would you believe it’s actually the smartphone that’s here to save the day! Insurance companies have developed new Smart Driving Apps that run in the background on your cell phone while you drive. This technology allows them to differentiate between drivers in the exact same insurance pool based on the factor that’s driving up insurance premiums the most: individual driving habits. It’s still new and not all insurance companies have it but I believe this new technology is here to stay.
With the new smart driving apps insurance companies can track distance, speed, breaking and, yes, of course, how much you play with your phone while the car is in motion. This information is then calculated into a score and you’re given a discount based on your score. I’m not sure what the discount is for all the different companies but I know one of the companies that we represent starts at 3% and can go as high as 15% based on your driving habits.
Call Us Today To Learn More
I think this is a wonderful tool that puts premium control back in the hands of the customer. Just by altering your own driving behavior you could save hundreds on your auto insurance premiums per year. If you want more information on this new technology give us a call today at 817-625-1557!
