Joe Donohue / NJ Star Ledger | July 30, 2008
A new concept in determining auto insurance bills is coming to the state with the nation’s highest average rates: pay-as-you-drive.
For the first time, a New Jersey auto insurance company wants to equip cars with high-tech devices that constantly track motorists’ driving habits to determine how much they should pay.
Starting Aug. 8, Progressive Corp. will offer discounts to its 127,000 Garden State drivers if they install in their cars wireless devices that tell the insurer how many miles they drive, what time they’re out on the road, and how often and how fast they accelerate and hit the brakes.
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The company is dangling 60 percent rate discounts for the best drivers. Those who quickly rev up or slam their brakes, however, could face surcharges as high as 9 percent.
New Jersey will be only the fifth state with the pay-as-you-drive devices offered by the insurer.
“This is definitely the wave of the future,” said Loretta Worter, vice president of the Insurance Information Institute. “More and more companies are getting on board with tracking devices, seeing they offer a lot of advantages to consumers.”
Supporters of the idea say it reduces traffic because drivers want to keep their miles down. They say it improves drivers’ safety habits and cuts air pollution. They also contend it’s fairer than other new ways to charge motorists, such as basing rates on motorists’ jobs, credit scores or level of education. But others worry the devices are akin to having Big Brother riding shotgun.
“It’s a good idea for some people. It’s not for everybody,” said Richard Hutchinson, general manager of usage-based insurance for Progressive. “People need to think about this in their own situation.”
The insurer does not use how fast motorists drive as one of its rating factors and the company does not rat out speeders to the police, Hutchinson said.
In other states, about one-third of the company’s customers have enrolled and they are saving about 10 to 15 percent. New Jersey drivers pay an average of $1,184 per car in auto insurance premiums — highest in the nation, according to the latest statistics.
Hutchinson said the company can offer discounts because drivers are safer when they know they’re being monitored. Motorists may quit the program at any time.
The pocket-sized sensors, with the wireless transmitting capability of cell phones, are plugged into onboard diagnostic ports in cars dating back to 1996 models. Each day, they signal to Progressive computers about miles driven, when drivers are on the road and how they brake or accelerate.
“We’re supportive of a method that actually looks at miles driven,” said Stephen Carrellas, representative of the New Jersey chapter of the National Motorists Association. “Basically, the more you drive, the more you have a chance to be in an accident.”
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