The other insurance crisis: Auto insurance, and how to save money on it | Opinion
It is hard to believe, but insurance companies are losing money on car policies. Premiums have gone up, but crashes, litigation payouts and repair costs have risen even faster.
That means rates will continue going up. A few years back, my policy went up to nearly $700 per month on three cars, and I decided to change to a pay-per-mile policy on the advice of my agent. Here’s my experience in case it helps you when your bill goes up.
Pay-per-mile policies take some technology. I use Allstate Milewise, which has two parts: a device to collect information and a mobile app to show the information back. Both are important, but the app is how I get the benefits of my policy.
The device is a plastic box the size of a matchbox with many closely spaced pins on the side, which I plugged under my car’s dashboard. I quickly found the port for each of my cars on YouTube.
At first, this device made me nervous because it collects a lot of information, including my exact location, speed, every time I step on the gas, and all my braking. The payoff is that Allstate shares all that information back with me through their iPhone app.
When I load the app, the first thing I see is the remaining balance on my account, and how many days are left until Allstate charges my card again for my preset $200 reload sum.
The next screen after that shows me a weekly summary of spending and miles compared to a target for each. Below that summary, there’s a section for each car in my policy showing the rate per mile, the daily rate, and a lot of driving safety information, which I’ll go back to in a moment.
The rates on my car are 29 cents per mile and $1.67 per day. That would add up to $50 per month if I didn’t drive my car at all to $243 per month if I were to drive out the 8,000 miles per year in my lease.
The reality is that I drive a lot less than that because I work from home and most of my trips are two or three miles away. Other family members drive even less than I do. All told, we spent $300 per month on car insurance over the last six months, including a couple of road trips.
For each car, the Allstate app also gives me a safety rating for each day of the week, and then weekly totals for sudden braking events, high-speed miles, and late-night driving miles. In theory, reducing those numbers could lower my rates.
In practice, my driving behavior is the same as it always was. The genius of the system is to adapt the policy to my behavior instead of the other way around. I still don’t pay a lot of attention to my mileage: The system does that for me.
Nobody can control traffic, distracted drivers or never-ending road works. But you can mitigate the risk if you work from home (or take the Brightline!). The pay-per-mile technology is there to make that a better deal.
Victor Aimi is a founding partner and consultant of Verb.Company, an editorial services company. He is based in Fort Lauderdale.