About two months ago, Google released its latest mobile technological advancement – Latitude. Now everyone with a mobile device (which is just about every living soul over the age of 14) can track, or be tracked, by their friends and family. On the other hand, in a more malevolent approach, your boss can spy on you; or can you spy on your boss?
Nevertheless, it is another method where “Big Brother” can keep tabs on where you go, how often you go there, and how long you spend there. Parents can track their teenagers to make sure they’re in school, they went to the friend’s house they said they were going to, or if they’re at the lack watching the submarine races. However, other than the boss and employee relationship, does this technology also apply to the business world, or to be more specific the insurance industry.
Auto insurance carriers, including Progressive, are offering Pay As You Drive (PAYD) programs. This means that instead of the typical rating methods of garaging and vehicle types, auto policies, both personal and commercial, could be rated based on where you drive, and how often you drive, making your insurance use based, rather than ownership based. At least one company rates based on the miles you drive, but by inserting a GPS device into the vehicle, using existing technology such as GM’s On Star, or using your cell phone with Google’s Latitude, carriers can track your every trip. This could potentially be expanded to use based paying in other vehicle industries like car rentals.
Under the typical ownership based rating, insureds pay the same premium whether they drive 5,000 or 50,000 miles per year. A 2008 Brookings Institution study revealed that if premiums were based on use, driving would decline by 8% nationwide, saving $50 billion to $60 billion each year. Reduced carbon dioxide emissions would also result. Everyone wants to offset his or her carbon footprint. Each time I fly in and out of Cleveland, Continental offers me the option to pay a few dollars more to offset the carbon emissions for the flight. Most companies are now telling everyone how their packaging is made from recycled materials and how they help the environment. Like most people, I recycle, and I try to drive less, but that’s more because I’m too cheap to pay for the gas. Going green is mainly something that people try to do on their own. However, the Insurance industry is moving toward a new concept that could help push people in that direction.