16% Of Drivers Will Be Uninsured in 2009, Predicts Insurance Research Council

In Newsday, Tom Incantalupo reported that the Insurance Research Council, and industry group, is predicting an increase in uninsured drivers for 2010. Their projection is that 16.1% of all drivers in the United States will be driving around without auto insurance, an increase from 13.8% in 2007.

The IRC blames this state of events on the economy, because consumers are trying to cut back on expenses. With the unemployment rate rising at a similar clip, it’s somewhat understandable that keeping up with your auto insurance premiums may fall to the wayside. Still, it’s a bad idea to let your policy lapse. For one, when you eventually buy insurance again, your premiums could see a sharp increase. Not only do uninsured drivers risk fines and other legal punishment in most states; they also cause the rates of insured drivers to go up when they’re involved in a crash, Tom says.

How Technology Can Help Trim Auto Insurance

By M.P. MCQUEENJune 26, 2008; Page D1


For years, drivers paid less for auto insurance if they reported low mileage. Now, insurers are using high-tech devices to track customers' habits, and offering deep discounts to those who not only drive less, but also cautiously.

In the U.S., Progressive Corp. and GMAC Insurance, a unit of GMAC Financial Services, are the first and the largest companies to roll out this type of plan. At least two smaller companies, including Unigard Insurance Co. of Bellevue, Wash., a unit of QBE Insurance Group of Australia, also are poised to start similar ones soon. Companies in Canada and Italy also have programs, and Hartford Financial Services Group Inc. is testing the same technology in Connecticut.
Drivers who participate in these plans have devices installed in their cars that, depending on the technology used, can track the number of miles driven, the speed at which cars are driven and even how often and how hard the brakes are used. By allowing their habits behind the wheel to be monitored, drivers get lower insurance rates -- or pay higher premiums if they're lead-footed road hogs.

Usage-based insurance pricing would mean an estimated two-thirds of households would pay less in premiums than they do now, according to a report by the Hamilton Project at the Brookings Institution, a think tank. Researchers Jason Bordoff and Pascal Noel calculated average savings at about $270 per car, per year. Some analysts and insurers believe that after a slow start, usage-based insurance could take off now that higher gas prices are forcing consumers to drive less anyway.

Proponents of these plans say they also have the potential to help ease traffic tie-ups and reduce carbon emissions by rewarding customers for driving less. Fewer miles on the road also means fewer accidents -- and fewer claims for insurers. With pay-as-you-drive insurance, drivers in the U.S. would reduce their mileage by about 8%, with $51.5 billion in social benefits mostly from reduced congestion and accidents, according to the Hamilton Project.

Later this month, Progressive says it will re-launch and expand its program, formerly known as "TripSense." Currently available only in Michigan, Minnesota and Oregon, TripSense subscribers get a special device that plugs into their car's diagnostic port -- the place mechanics plug into when troubleshooting. The Progressive device, however, keeps track of when, how far, and at what speed the car is driven. Every six months, drivers must remove the device and upload stored information to a computer and send it to the company.

When Progressive's new usage-based program, known as "MyRate," is launched, the technology will require less driver effort. This program uses a telematic device, which gathers driver data and wirelessly transmits it over a cellphone network. Progressive says it will also track how often and how hard drivers brake and use the braking information when calculating rates. This system doesn't include a global positioning system, so it won't track a driver's whereabouts. Drivers get back a periodic report that tells them how many miles they've logged and other feedback about their driving habits. Based on the data, they'll receive discounts ranging as high as 60%, depending on the state.


Bad-Driving Surcharge
But the device could raise rates for some drivers. In some states where it's permitted by law, drivers would be assessed a 9% surcharge for logging excessive miles or driving at high speeds with hard braking, said Richard Hutchinson, a general manager for Progressive.
Progressive, which has 7.1 million auto policies in force nationally, says 34% of its customers in Michigan, Minnesota and Oregon who signed up via telephone or Internet (instead of their agent) have been choosing the usage-based programs since 2004. The new plan is expected to be available in six more states by the end of this year and will also be sold by independent agents, the company said.

Brandon Biniecki, a 23-year-old information-technology support technician in Monroe, Mich., says he signed up for Progressive's usage-based program in 2006 for his Chevy Cobalt, a compact car. He drives less than 18,000 miles a year and currently receives a 5% or 10% discount from the company every six months, he says. Mr. Biniecki says he doesn't mind being monitored in return for saving money, but admits he might not have signed up if a global positioning system, or GPS, was involved.

"That would be an invasion of privacy, with someone being able to know where I am at any given point in time," he says.


OnStar
GM's OnStar technology, shown here, is used to gather driving data.
Other insurers include GPS in their monitoring devices. GMAC Insurance's Low-Mileage Discount Program with OnStar, which expanded to a total of 34 states last year, grants discounts to users of vehicles equipped with GM's GPS and communication systems. The company says that enrollments have increased 200% since last year, and that customer retention rates are higher for those using the device.

In order to receive a discount, the driver must subscribe to OnStar, which is generally free for the first 12 months to buyers of new GM cars, and costs $199 to $299 annually after that. New customers who agree to have odometer readings sent directly to GMAC Insurance will earn a 26% discount if they drive less than 15,000 miles annually. (Existing drivers earn discounts based on their actual mileage.) Even heavy drivers can still earn a 5% to 8% "safe driver" discount just for subscribing to the service. Low-mileage discounts increase in tiers as fewer miles are logged. For instance, someone who drives less than 2,500 miles a year can qualify for a 54% discount.

'I Didn't Believe It'
Don West, 74, a real-estate broker in Gresham, Ore., says he reluctantly switched his coverage to GMAC Insurance, leaving his longtime agent, a personal friend. Because he and his wife drove less than a combined 15,000 miles a year, their rate plummeted. Says Mr. West: "I was paying $2,000 a year in premiums for the Cadillac and the Hummer, and it dropped the premium the first year I was on GMAC to $886 dollars. I didn't believe it at first."
About 20,000 drivers currently participate in the GMAC low-mileage program with OnStar, says John O'Donnell, vice president of business development at GMAC Insurance, out of five million OnStar clients.

At this point, OnStar only relays odometer readings to GMAC Insurance, Mr. O'Donnell said. OnStar doesn't continuously track drivers' location and only pinpoints a car's whereabouts at certain times -- when the device is activated by a crash or the police receive a stolen-vehicle report, for example. "There is an opportunity to get other information, and as we do we will be able to correlate risk to actual driving behavior itself rather than more predictive factors," Mr. O'Donnell says.

5 Ways To Cut Car Insurance Costs

You can't fill your tank these days without feeling as if you've been kicked, simultaneously, in the gut and the bank account.

There's not much you can do about gas prices, but there is one thing you can do to cancel out rising car costs: Get a better deal on your auto insurance.

Competition has kept premiums low; and if you haven't revisited your policy in a while, you may have missed some money savers.

Try one (or more) of these methods to put your auto expenses in neutral.
Prune coverage on old cars

Once your vehicle is worth less than 10 times what you pay each year to insure it, get rid of comprehensive and collision. Find your car's estimated value at kbb.com.


Raise your deductible
The point of car insurance is to protect you from catastrophic costs (your emergency fund should cover stuff like dents and broken windows).

Raise your deductible from $200 to $1,000 and you could save more than 40% on premiums, says the Insurance Information Institute.


Nab discounts
Most insurers offer price cuts for such things as having anti-lock brakes; having been accident-free; having taken a defensive-driving course; and even for using the same insurer for your home policy. For more, see the auto insurance checklist at iii.org/individuals/auto.

These can take up to 25% off your premium. But your insurer won't come to you with them; call the company and ask what discounts it offers.


Dig up competing quotes
This is the most work but could have the greatest payoff. Go to naic.org to find your state insurance commission Web site, where you can download a car insurance buying guide.

This often lists scenarios (Mary is a 34-year-old married woman who drives a Chevy Tahoe) with sample rates from the biggest insurers in the state.

Pick the example closest to you and the five insurers with the lowest rates. Call them for quotes.
If the state guide doesn't list insurers, get the five best quotes at insweb.com, but note that the site doesn't include State Farm.

Next, check with an independent agent (get a name at iiaba.net) to see if any insurers you haven't checked can beat your top five.


Sidestep hassle
Make sure any insurer with a better quote is legit. Vet it via your state's insurance commission site; look especially for the ratio of complaints to number of policies written.


By Joe Light, Money Magazine

Texas Auto Insurance Database

Two years ago, lawmakers ordered up a system to bust the millions of Texas residents who drive illegally without auto insurance. They're still waiting, and insured motorists are still paying big bucks to insure themselves against the scofflaws.

Although a contractor has been selected to operate the new auto insurance verification program, officials said the database needs more fine-tuning and now won't be launched until 2008.

The delay stems from concerns about the mountain of data required for the program and worries that people could be ticketed or even arrested because of inaccurate information.

The program, funded with a $1 fee paid by all Texans when renewing their registration each year, is aimed at catching uninsured drivers by allowing police officers, state troopers, vehicle inspection stations and others to instantly verify whether a motorist has the minimum insurance coverage required under state law.

About 20 to 25 percent of Texas drivers are uninsured, according to state officials and the insurance industry.

State Agriculture Commissioner Todd Staples, who authored the legislation when he was a state senator in 2005, expressed disappointment that it has not yet taken effect. But if there are still glitches in the system, he added, it is better to delay the startup.

Numerous lawmakers have said one of the most frequent complaints they hear at town hall meetings is about the large number of uninsured drivers in Texas and the extra cost they represent for the majority of drivers who buy insurance.

The insurance industry estimates that Texas drivers shell out nearly $900 million a year to protect themselves against those without coverage.

Although Texas has had a law requiring drivers to buy insurance for years, enforcement has been difficult even though proof of insurance must be furnished to get a license renewal or safety inspection. The policy must contain liability coverage to pay for injuries and damage caused by the driver.

Millions of motorists skirt the law by using counterfeit proof-of-insurance cards or by obtaining a month's insurance coverage to get an ID card, only to cancel the policy once they get their licenses renewed or their vehicles inspected.

Those plans are expected to get a boost once the state verification program is operating.

The state program is being coordinated by the Insurance Department along with the departments of Public Safety, Transportation and Information Resources, which are exploring how to best use the data to enforce the law. In some states, for example, uninsured drivers receive written notice from the state giving them a certain amount of time to buy coverage to avoid penalties.

HDI Solutions Inc., an Alabama-based firm that specializes in data management, was awarded a contract from the state in November to set up the verification program. The company, which will partner with three other high-tech firms, is being paid $7 million over two years to get the program running. HDI operates a similar program in Alabama.

Arizona Auto Insurance Comparison Guide

The Arizona DOI has released its "Automobile Insurance Premium Comparison" to aid consumers with comparison shopping for auto insurance. The publication contains auto insurance quotes from 75 insurers for a dozen different driver scenarios.

On average, auto insurance companies offered a $94 discount for Phoenix residents who took the bus to work, although it noted carpooling or alternate means of transportation could have the same benefit. At least 36 insurers offer discounts to customers who significantly reduce their annual mileage by taking the bus to work every day.

The guide also includes a summary and explanation of the different types of auto insurance coverage available, and provides insurer complaint ratios, representing the total number of written complaints the Department has received for each 1,000 policy exposures an insurer has in force.