Use of high-tech driving monitor can cut premiums

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By Tom Hester Jr.

TRENTON, N.J. (AP) | A high-tech monitoring device makes it possible to reduce insurance premiums for drivers who avoid jackrabbit starts and slam-on-the-brakes stops, an insurance company says.

The catch? Bad drivers who take a chance on the program may wind up paying a surcharge instead.

Auto insurer Progressive Corp. has begun offering its drivers the chance to cut their costs based on how they actually drive, not only on their age, credit score and number of tickets or accidents on their record.

The monitoring device - sort of like a black box for cars - tells Progressive what time people drive, how many miles they've driven, how fast they accelerate and how often they hit the brakes. It does not track where people go.

Under Progressive's program, customers can earn a first-term discount of up to 10 percent just for signing up. When they renew their policy, their rate could decrease by up to 60 percent based on their driving habits. But it could also increase by up to 9 percent.

Richard Hutchinson, a Progressive general manager, said the program is designed for drivers who are consistent and safe.

"We want people to know that the program is not right for everyone," Mr. Hutchinson said.

"It's for people who drive at low-risk times of day and who keep alert for others on the road," he said. "They don't make fast lane changes or follow too closely behind other drivers, so they don't have to overreact or slam on the brakes."

Progressive began the program in Alabama in late June. It's also been made available in Minnesota, Oregon and Michigan. A national rollout of the program will continue through 2009.

It starts in New Jersey on Aug. 8. The company will be the first to offer such a program in the Garden State, whose motorists have the highest auto-insurance rates in the nation at an average of $1,184 per vehicle.

Other companies also recently began offering similar options.

GMAC Insurance and OnStar vehicle services last year started a new program that allows motorists to earn an extra discount based on the miles they drive.

"The consumer is really being given an opportunity to potentially reduce their auto-insurance premium in exchange for giving their auto insurer access to information that currently isn't available to them," said Michael Barry, a vice president at the Insurance Information Institute.

Several insurers in recent years have offered monitoring of a particularly vulnerable population of drivers - teenagers. Under American Family Insurance Co.'s program, for example, a camera records audio and video images of the road and the teen driver when motion sensors detect swerving, hard braking, sudden acceleration or a collision.

Charles Samuelson, executive director of the American Civil Liberties Union of Minnesota, told the Star-Ledger newspaper of Newark, N.J., that the group has worries about privacy.

"We see this as kind of a creeping abduction of people's data," he said. "Basically, once they collect that data, it belongs to the insurance company. That's a big problem."

Progressive spokeswoman Tara Chiarell disagreed, saying the customer owns the data and Progressive doesn't sell it or share it. The company uses it only for claims purposes. She said Progressive has never been subpoenaed by a court to submit pay-as-you-drive claims data.

Customers can access their data on a secure, password-protected Web site, which allows them to get an up-to-date view of their driving habits and how those habits are affecting their rate, she said.

AAA Mid-Atlantic spokesman David Weinstein said if a link between electronic monitoring and accident probability becomes clear, AAA would like to see all drivers' insurance premiums based on that information, "not just select drivers who grant their permission."