New Technology Takes Aim at Bringing Down Auto Insurance Premiums
Car insurance is a necessary pain point for someone enjoying the convenience of owning a personal vehicle they can take anywhere, at any speed they choose.
This is necessary because, for most Americans, a car is one possession that is slightly outside of their financial comfort zones – repairing one could cost thousands, money most Americans don’t have. Most Americans also borrow money, either in the form of a bank loan or by financing through the dealership, in order to afford a vehicle.
Without insurance, most dealerships and banks wouldn’t be able to take the risk in lending this money because of the likelihood that drivers will get into an accident and be unable to afford the repair costs. Insurance companies are willing to provide that money for those who are in accidents - if drivers all pitch in every month.
Where Auto Insurance Rates Come From
The monthly rate everyone pays for their car insurance is based on the calculations that insurance companies do to determine the likelihood you are going to get into an accident.
Insurance companies use a huge number of factors to determine what someone’s insurance rates should be. Age, driving record, the make and model of the vehicle, and previous insurance rates are the most obvious variables an insurance company will consider when determining rates. However, less obvious things like zip code, commute mileage, and marital status also factor into someone’s payment.
Basically, insurance rates are based off of the number of accidents that people like you have been in compared to the number of accidents other groups get into. This means many, especially those who rarely drive, are paying for the mistakes others made even though it probably isn’t going to happen to them.
A Tech Savvy Solution
However, that's all about to change.
DriveSmart technology, something being considered by New York City officials, uses cellular or satellite technology and is paired with an on-board device in a computer system of a vehicle that tracks the mileage, speed of driving, and other habits that could help insurance companies decide an appropriate premium for drivers.Continued on the next page