In the past auto insurance rates were based on factors such as the drivers age, your driving history (based on your motor vehicle report MVR) location and your insurance score (a credit-based tool used to assess risk). Insurtech has changed that!
Usage-based Insurance (UBI) starts with the use of a monitoring device that is typically installed in your car or operates through your smartphone. This will then report the information that the insurance company uses to analyze and create a premium for the specific insured.
Types of UBI
- True mileage-based usage- This system uses a monitoring device to give the insurer an exact mileage driven for a set period of time. The mileage is then reported and you are charged the per mile rate previously agreed upon. In this model there is typically a flat charge per month that is applied for processing etc., this would be charged even if the vehicle was not driven.
- Pay as you drive- This system monitors the variables that the insurance company has chosen to use in creating a premium for each individual. Some of the items that are monitored are, hard stopping, hard acceleration, time of day vehicle is being operated, speed and cornering angles. Once this data is collected and analyzed by the insurance company a rate is calculated and given to the insured.
- Over time pay as you drive has morphed into, manage how you drive (MHYD). This is a much more interactive model that provides notifications of driving habits to be reviewed and assist the vehicle operator in modifying their driving habits. The next generation of MHYD will give the operator real-time alerts to assist in modifying driving habits.
Is UBI right for you? It may be, if you are a safe and cautious driver who does not drive very often, then UBI could be a good option for you. By driving less and avoiding risky behaviors, you may be able to save money on your premium.
To learn more about UBI and other savings that may be available to you contact the Trusted Choice Insurance Agents at Richey-Barrett before you renew your auto or home insurance.