How Car Tracking Programs Are Changing Auto Insurance

No one likes a backseat driver criticizing their driving skills. But what if that critic is your insurance company — and what if it’s offering you money to drive safely? That’s essentially how car telematics programs work.

Telematics means devices communicating wirelessly with each other. In the realm of car insurance, it means insurers collecting data about a customer’s driving habits from a small in-car tracking device. This allows insurance companies to incentivize safe driving with discounts and collect vast amounts of data about how and when their customers drive.

How Do Car Tracking Programs Work?

Each insurer’s program has its own rules and features, but in general, car tracking programs work like this. When you sign up, a small device is plugged into your post-1996 car’s diagnostics port to track your driving habits. The tracking device collects data on things such as:

  • Miles driven
  • Acceleration
  • Braking, including “hard braking” incidents
  • Right and left turns
  • Speeds of 80 mph or over
  • Time of day the vehicle is driven

Participants can typically access their own data online, as well as information about fuel efficiency and even car diagnostics.

While car tracking programs may feel intrusive, your car insurance company is already collecting personal data that has nothing to do with driving. To calculate risk — and your premiums — insurers consider things such as age, gender, marital status, income and education level. Usage-based insurance is just the latest frontier in insurance companies’ quest to accurately predict risk.

What are the top car telematics programs?

Since Progressive first began testing car tracking programs in 1998, car insurers have raced to successfully create programs of their own. By 2020, according to an SAS white paper on big data and the insurance industry, more than 25 percent of all auto insurance premium revenues in the United States will be generated from policies using car tracking programs. Here’s a quick look at a few major insurers’ pay-how-you-drive programs.

  • Progressive Snapshot considers how often you brake hard, how many miles you drive each day and how often you drive between midnight and 4 a.m. Drivers plug in the device for six months to set their discount, which runs up to 30 percent, and can even try it if they’re not yet Progressive customers to see how much they can save.
  • Allstate Drivewise measures the same things, with the addition of speed, and says miles driven are the most important factor in calculating your discount.  Allstate offers a 10 percent discount just for signing up and recalculates your discount, which goes up to 30 percent, every six months.
  • State Farm Drive Safe & Save offers discounts as high as 50 percent for safe driving with this program. The catch? To participate in Drive Safe & Save, you need to pay for a third-party vehicle tracking and communications package, such as OnStar, SYNC (on Ford vehicles) or In-Drive from Verizon. This means State Farm can track your vehicle via GPS, although the company State Farm says it only receives information about the general areas in which a vehicle is driven.
  • National General Low-Mileage Discount is a pay-as-you-go insurance program that tracks your mileage via OnStar. People who drive less than 15,000 miles a year are eligible for savings, with a whopping 54 percent discount available for those who drive less than 2,500 miles a year. 
  • Metromile is a new entrant into the car insurance industry that offers pay-as-you-drive policies for low-mileage (under 10,000 miles a year) drivers in California and a handful of other states. Metromile uses a free tracking device and an app that gives you driving stats and car diagnostics.

The benefits of car tracking programs

Safe drivers can get big discounts. Should a cautious teenager pay higher rates than a reckless 40-year-old?  Telematics devices offer an opportunity for careful drivers to be rewarded for their good driving habits.

Car Tracking Programs improve transparency. Insurance companies use all kinds of secret data and unseen algorithms to calculate premiums. With these programs, customers can see exactly how their driving affects their insurance rates.

You get feedback on your driving. Simply by tracking your driving online, you may become more aware of bad habits. The Snapshot device also provides instant feedback by beeping when a driver brakes too hard or accelerates too quickly.

The downside of car tracking programs

Drivers worry they’re compromising their privacy. The thought of an insurance company knowing when, where and how they drive is enough to make many people nervous. Insurance companies have privacy policies for their telematics data, but these can be broad. For instance, Progressive says it won’t share Snapshot data with a third party “unless it’s required to service your insurance policy, prevent fraud, perform research or comply with the law.”

It’s not clear who owns the data. Does it belong to you or the insurer? “Can the insured person transfer telematics data (i.e., a driving record) from one insurance company to another?” asks SAS.

Some users question the devices’ accuracy. In online reviews, many users of insurers’ tracking devices express irritation and frustration with the number of incidents the device records, specifically “hard braking events.”

Insurance companies’ criteria penalize some drivers unfairly. If you work the late shift and do most of your driving at night, you’ll be penalized for it.

For the time being, car tracking programs just promise big discounts for safe drivers — but in the future, insurers will probably use this technology to raise rates for risky drivers as well. Whether you’re ready to try usage-based insurance or not, you can save big on car insurance by getting free quotes from

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