- The Washington Times - Friday, October 2, 2009

Farmers Group Inc., the U.S. unit of Zurich Financial Services AG that bought AIG’s auto-insurance business in April, plans to lower premiums by charging drivers for coverage by the mile, measuring car usage by iPhone and BlackBerry.

The insurer wants to base insurance costs on miles driven to “charge the right premium for the right risk” and keep premiums low, Mark Toohey, a spokesman for Farmers, said in a telephone interview from Los Angeles last week.

The company is considering offering a tracking product using mobile-phone technology at the end of this year or early in 2010.

Voluntary “pay-as-you-drive” regulations that allow insurers to base premiums on actual miles driven were announced Sept. 3 by the commissioner of the state of California Department of Insurance, Steve Poizner, who is responsible for enforcing insurance-related laws and previously founded SnapTrack Inc., which pioneered technology that put Global Positioning System receivers into mobile phones.

“We see some potential in California for using this type of technology because of California’s unique auto-rating regulations, which focus heavily on miles driven,” said Mr. Toohey.

“Farmers doesn’t support the use of any technology which would require a customer to be tracked,” he said. The company said the option to be tracked would be made available to customers and only used with their agreement. U.S. insurers are regulated separately in each state.

Insurers have been testing technology to offer pay-as-you-drive insurance in countries including Britain, the United States and the Netherlands.

So far, such insurance lets motorists prepay for the miles they expect to drive during the term of coverage, as with Polis Direct in the Netherlands, which is part of the Dutch automotive trade association BOVAG.

Aviva PLC, Britain’s second-biggest insurer by market value, offered a policy that fitted a black-box tracker device into cars using so-called telematics technology to record journeys. The insurer stopped offering the product last year because it “had to bear the cost of the box and the operating model was very costly for Aviva,” Erik Nelson, a Norwich, England-based spokesman, said in a telephone interview last week.

“We’re looking at various technologies and have set for ourselves an internal deadline for going to market with a usage-based rating option for our customers,” Mr. Toohey said. “Voluntary tracking measures and technologies may have as much relation or even more relation to accident risk as miles driven. Examples of these risk measures would be car speed, hours of day a customer drives or driving in congested areas.”

Separately, the Los Angeles-based Farmers launched last week an iClaims application for customers who used iPhones or iTouch. The application allows Farmers customer to immediately file an insurance claim.

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