How to Use Tracking Devices to Save Money on Car Insurance

Most people get pretty annoyed when they're quoted a high rate for auto insurance, especially if they've been accident and claim-free for several years.

But the truth is, when car insurance companies calculate your rates, they base those numbers on statistics that don't necessarily ring true for you. For example, insurance companies charge men higher rates than women even though some men are safe drivers and never get into accidents or file claims.

You may be a model customer, but you wind up paying higher premiums for the claims incurred by other accident-prone drivers who happen to be in your demographics and are insured by your insurance company.

You can see why this situation screams of unfairness to most cautious drivers who always follow the rules and obey safe driving practices.

The good news is that a new day is dawning in the world of auto insurance. Thanks to the advent of usage-based insurance (UBI), you'll be rewarded for your good driving behavior by becoming eligible for safe-driver discounts.

UBI, also known as Pay-As-You-Drive (PAYD), Pay-How-You-Drive (PHYD), Pay-As-You-Go, and Distance-Based Insurance, according to the National Association of Insurance Commissioners (NAIC), lets your insurance company monitor your driving by installing a tracking device in your car.

Your rate becomes solely based on your driving behavior and history, not locked on how you fit your insurance company's assumptions about who you are, how you drive, and how risky you are to insure.

To understand how UBI can help you save money on car insurance, let's first discuss why the current system is costing you more money.

How Car Insurance Companies Calculate Your Rates

calculating insurance

Insurance companies need to calculate their risks of insuring you. After all, they're a business, and they need to make a profit. They won't do so if they give everyone low rates for high coverage and then wind up paying out more in claims than they're earning in premiums.

To minimize their risk, car insurance companies will use an algorithm that takes several factors about you into consideration. That final number becomes the premium you have to pay for coverage.

So what kind of factors are they using to decide how much you pay?

This set of characteristics varies for each insurance company, but they measure how likely someone is to get into accidents, file claims, and cost the company money.

They usually include:

Driving Experience

Teenagers and drivers in their 20s pay the most for car insurance because the statistics show that they're the largest group of inexperienced and distracted drivers. says that "10% of drivers of all ages under the age of 20 involved in fatal crashes were reported as distracted during the time of the accident." But teens aren't the only distracted ones. "Drivers in their 20s make up 27% of the distracted drivers in fatal crashes."

It's not just being distracted that raises rates. Insurance companies look at how long you've been driving as well. Inexperienced drivers fail to see or prevent dangerous situations that more experienced drivers can avoid.

If you drive safely for 10 years, when you turn 25, you'll probably see lower premiums. But if you started driving at 21 and got a few speeding tickets, you won't automatically get a discount when you hit 25.

For more info on car insurance in your 20s, check out this article for a few money-saving tips.


As Esurance quotes the NAIC: "Women are less likely than men to get into a car accident." Which means you may be automatically paying higher premiums as a male than your feminine counterparts.

Then again, men are "about 10% less likely to wear a seatbelt", drive faster, and engage in riskier behavior, so their chances of incurring a life threatening or serious injury are higher.

Marital Status mentions an interesting study that was conducted in 2004 by the National Institutes of Health, which found that "drivers who have never been married had twice the risk of driver injury than drivers who were married."

But if your beloved is an insurance company's nightmare (speeding tickets, unpaid parking fees, monthly claims, etc.), merging policies with them will raise your bundled rates.

Vehicle Type

Safe vehicles such as hybrids, small SUVs, four-door sedans, and minivans are all the most affordable to insure. Their safety features should reduce your number of accidents; therefore, you reduce your number of insurance claims.

However, large SUVs, cars/trucks with V6 or V8 engines, and sports cars will cost more to insure since they're seen as less safe and cost more to repair.

Claim History

You may notice your rates increase after you file a claim or get a driving ticket. These high-risk behaviors raise red flags at your insurance company, and they'll start to worry about having to pay thousands in potential repairs or settlement claims if you get into a serious accident. By charging you higher premiums, they hope to recoup some of that money before they need to spend it.


A New York Public Interest Research Group study discovered that "auto insurers charge higher rates to drivers with less education and nonprofessional, nonmanagerial jobs."

Which means you could have a squeaky clean record, but lack a college degree or professional title and wind up paying more than the wealthy doctor with the horrible driving record and fast sports car down the street.

Credit History

Yes, your insurance company checks your credit score and uses it as a factor when calculating your car insurance rate.

The thinking here is that since studies have linked higher credit scores with safer driving habits, insurance companies can use your credit score to determine how dangerous you are as a driver.

It's in your best interest to keep your credit score on the high end if you're looking for affordable premiums. Consumer Reports notes that, "A poor credit score could add $1,301 to [your] premium, on average."

Where You Live & Work

Residing in a safe residential area with very little traffic, off-street parking, and crime rates next to nil is a huge plus for your insurance rates. But if you're living in the city with heavy traffic, aggressive drivers, and street parking, your rates will surely be higher.

As of 2016, the following states had the highest car insurance premiums on average:

  1. Michigan
  2. Montana
  3. New Jersey
  4. Louisiana
  5. Oklahoma
  6. DC
  7. California
  8. Florida
  9. Maryland
  10. Rhode Island
  11. Delaware

Have a long commute from your residential home to your job downtown? Insurance companies don't like long commutes, especially those during the congested peak times of rush hour. They want to see you on the road for the least amount of time during the least busy time of the day.

Shorter commutes mean you're on the road less and have fewer chances of getting into accidents and filing a claim. Working from home is even better.

Now that you know a few of the statistics used to generate your auto insurance rate, do you feel like you're unfairly pigeonholed?

Think about this: If you're an unmarried male with a high school degree working a blue-collar job, driving a pickup truck with a V8, and living in Michigan, you have at least six factors going against you to actively raise your car insurance rates.

But what if you could prove to your insurance company that you're more than what you drive, or where you live?

If you're sick of being judged based on statistics that aren't representative of your driving skills, you may be a perfect candidate for usage-based insurance.

What is Usage-Based Insurance?

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Usage-based insurance (UBI) directly correlates your driving behavior with your car insurance premiums.

The NAIC tells us that Progressive Insurance Company and General Motors Assurance Company (GMAC) partnered together during the early 2000s to work on UBI programs that used GPS and cellular technology to track how many miles people were driving. If one chose to enroll in the program, they would receive discounts for their safe driving, plus "ancillary benefits like roadside assistance and vehicle theft recovery."

It may have been these two attractive additions that convinced car owners to become early UBI adopters. Researchers then studied the information they collected and improved the UBI devices, so they track more than just miles today.

Similar to how black boxes work in airplanes, your insurance company will give you a small telematics device that you can typically fit in the palm of your hand. You'll then install this device in your car yourself. All you need to do is plug the device into your car's onboard diagnostic port (OBD-II port). If you never knew your car even had one of those, check under your dashboard near your steering column.

Keep in mind that cars older than mid-1990s models may not have this port. But newer cars may already have the equipment to monitor your driving behavior installed right on your car's computer so you may not require a physical device.

Now, this device will start tracking information while you drive and automatically report these numbers back to your insurance company over wireless phone networks.

UBI programs go by different names depending on each insurance company.

Some of the most famous include:

Theoretically, the worse a person drives, the higher their premiums; the safer someone drives, the lower their premiums.

An article in the Chicago Tribune mentions a poll by Progressive, which showed that "84% of drivers define their driving habits as 'cautious' or 'defensive.'" But how does your insurance company quantify 'safe driving'?

It's way more than just remaining claim and accident-free.

What Information is the Device Recording?

Depending on how willing you are to share information with your insurance company, they could collect a variety of data regarding your car's whereabouts and activity such as:

Time of Day

Ok, so you can't avoid the rush hour traffic to and from work, but how long is your commute? If you're on the road from the very start of rush hour to the very end, your insurance company isn't going to be super happy.

Similarly, stay off the road between midnight and 4 a.m. This danger zone is home to accidents from overly tired drivers and those who may have been partying a little too hard. Plus, visibility can be an issue during these darkest hours of the night.

Miles Driven

Aubrey Cohen of NerdWallet says that the biggest factor in determining how much or how little you pay each year is your mileage. Driving 12,000 miles or less each year seems to be the magic number.

Esurance boasts saving as much as 10 - 30% if you keep your driving miles under this limit. Driving fewer than 12,000 miles can lead to the largest savings for Allstate as well.

But keep in mind that Allstate's DriveWise discount will not apply if you drive more than 18,000 miles per year.

City dwellers may have higher rates due to where they live, but if they start walking or using public transportation more, they may enjoy a discount for driving so few miles.

Hard Turning

When you take a turn or curve too quickly, your UBI device will be able to record the G forces experienced as leaning while turning. Each insurance company uses a different threshold level of acceptable G force so just make sure to take turns nice and smooth.


Insurance companies don't get the warm and fuzzies when they see you cruising near the 80 mph marker for extended periods of time. Never go above 80 mph with a tracking device if you want to show your insurance company that you're responsible and trustworthy.

Keep a safe driving speed by staying at or under the speed limit. This will protect you from speeding tickets, adding points to your license, and losing control of your vehicle and causing an accident.


Frequently increasing your speed more than 5 mph in one second or less has been associated with a higher number of insurance claims.

If you're merging or getting on the highway, use gradual acceleration to maintain control of your vehicle and stay within speed limits. Always speeding up to pass other cars during your commute may cost you some brownie points with your insurance company.

Hard Braking

Braking hard and abruptly may save you from getting into a fender-bender, but it also shows your insurance company that you're tailgating, not keeping a safe distance from other cars, and probably distracted or speeding.

Hard braking "means forcing the vehicle to stop suddenly or abruptly speed up in excess of 7.7mph per second."

Hard braking not only causes wear and tear on your car, but Dave Pratt, general manager of usage-based insurance for Progressive, says hard braking is "one of the most highly predictive variables for predicting future crashes."

According to Progressive's Snapshot data:

  • In looking at the most aggressive one percentile of stops, it takes drivers 12 seconds to come to a complete stop when traveling 60 MPH.
  • At the other extreme, the most gradual one percent of stops from 60 mph take a full 40 seconds.
  • The average driver falls right in the middle at 24 seconds - this equates to the distance of 4.2 football fields, or singing Happy Birthday three times in a row.

While that may seem like a lot of information to collect, these are just a few driving behaviors that are being monitored now. Patents reveal that Progressive is interested in creating:

"A system that would consider things like who's driving, the number and weight of occupants, distance, speed, time of day, pitch and roll, acceleration and deceleration, 'relative distance to other objects,' environmental conditions, and use of turn signals, headlights, windshield wipers, horns, brakes, radios and seatbelts."

Installing one of these devices means your insurance company will always be watching you when you drive. You may be scared with this much transparency as there's nowhere to hide your speeds when you're late for work and weaving in and out of cars on the freeway.

But there are some incentives to UBI you may want to consider.

What Are the Benefits of UBI?

benefits abound

Richard Hutchinson, a usage-based insurance business leader at Progressive, says, "It's easier [to use UBI] than people think it is. It's a chance to make insurance more personal."

So what will you get out of monitoring your driving behavior?

Lower Auto Insurance Rates

Consumers enrolled in UBI programs typically save between 10 - 15% of their premium if their driving is deemed safe by their insurance company. This means the factors used to determine your original premium will be replaced by your specific driving patterns.

Drivers who were typically viewed as 'high-risk' have the chance to prove that they deserve a premium that's fair and more accurately represents them. Their high car insurance premiums may be lowered significantly if they're right.

It's this hope of discounts that's made Progressive's Snapshot program so "amazingly popular" that it's bringing in more than "$2.6 billion in premiums." In fact, "Progressive says 70 percent of more than 1 million drivers who signed up for its Snapshot program end up paying less for their insurance, saving about $150 per year."

Safer Drivers

While some drivers admit to treating UBI like a game to see how high they can score on the safety scale, installing the device does make most drivers more aware of their behavior.

If you know what kind of discounts your insurance company is offering, say a 10% discount for driving less or driving safer, you may have an incentive to walk more or stay under the speed limit when you drive.

According to Progressive, drivers tend to stop braking so hard within weeks of installing their UBI device. Then again, Progressive's device also beeps when you brake hard, so you almost have to adjust your behavior if you don't want to interrupt your favorite song on the radio.

Over time, drivers will be adamant about modifying their behavior to keep the discounts safe driving has earned them. Drivers who are paying attention to their actions means there might be fewer accidents on the road and fewer claims insurance companies have to pay out.

Monitor Your Teen Driver

Install a UBI device on the vehicle your teen uses to monitor their driving behavior when you're not around. You'll be able to see how far they're driving, how fast they're going, and how hard they're braking by checking their device's statistics online.

If your teen is a safe driver, you may even qualify for a discount.

To learn more about saving money with a teenager on the policy, check out this post:

Money Saving Tips For Teen Drivers

Eliminate Fraud and Theft

Insurance companies charge such high premiums because accident claims fought in court or settled out of court cost them money. Unfortunately, some people attempt to cash in on this situation and try to commit fraud.

Luckily, UBI devices can provide insurance companies, prosecutors, and defendants with the actual data from the accident in question. Information that led to the crash, such as speeding, hard braking, and time of day can all be used to determine liability and accident damages.

If your vehicle happens to be stolen while a UBI device is installed, insurers hope to track and recover that car quickly by relying on the tracking data and working with law enforcement. Each device is connected to that respective vehicle identification number (VIN).

Data May Help You In Court

Not many people find themselves on trial for their life, but when 28-year-old Michael Beard was facing 15 years to life in prison for possibly suffocating his baby daughter, his Progressive Snapshot device acquitted him of all the charges against him.

Beard, a state-trained nursing aide, got off working the graveyard shift, discovered that his daughter wasn't breathing, woke her mother, and rushed his daughter to the hospital.

"Evidence from the Progressive Casualty Insurance Company's Snapshot device in Beard's car showed Beard had turned off the car at 4:44 a.m. and turned it back on three minutes later."

Which seems more important now: saving money, or saving yourself from prison?

Ensure Fleet Safety

Businesses or government departments with company vehicles could have UBI devices installed on each car in their fleet.

They'll be able to monitor their employees' driving behaviors and keep the safest crew on the roads. They'll also learn information about how to cut costs; from routes that put wear and tear on their vehicles, to those that need more gas to get through, UBI devices will help determine the most cost-effective and safe routes.

Get Back in Your Insurance Company's Good Graces

take me back

Ok, so you have a few speeding tickets, and you've been in three accidents this year - but none of them were your fault - and now your insurance premium is through the roof. Even though you're committed to being a responsible and safe driver, you probably think installing a UBI device on your car would be a bad move, right?

Well, think again.

Many insurance companies are now offering programs such as Safeco Insurance's Rewind system which is meant to get you back to the lower car insurance rate you had before your tickets, minor violations, and at-fault accidents. Their motto: "Redo. Recover. Rewind."

Basically, programs like this allow you to start over with a clean slate. You'll have the opportunity to demonstrate to your insurance company that you deserve a second chance at lower premiums.

Rewind will waive your driving setback for the first policy term if you agree to use their UBI device. Without this offer, you may have to wait several years and keep your driving record claims-free before you could even become eligible for your pre-setback rate.

Just plug the device in and drive on your best behavior for the next four months while your driving data is collected and sent to your insurance company. You can even check your driving data online to see how well you're doing.

At the end of this time, your insurance company will give you a new safety score and a possible discount if your driving score is high enough. Then you can send the device back (unless you want to continue UBI) and they'll permanently waive your driving setback - as if it never happened.

You may want to try a tracking device if for no other reason than to monitor your behavior for yourself and improve your driving. Typically insurance companies will offer discounts for safety, but they haven't been raising rates based solely on tracking information. However, don't expect that to last forever.

Progressive already admitted in their annual report that they're "for the first time, increasing rates for a small number of drivers whose driving behavior justifies such rates."

Now that we've covered all the positives of UBI, let's talk about some of the negatives associated with the system.

Who Can Access this Collected Information?

To California-based navigation, telematics, and probe vehicle consultant Christopher Wilson, the big issue is whether insurance companies are going to be in the "data processing and retaining business" or use third-party data centers to analyze and store all of the information their UBI devices collect.

The insurance companies would have to convince their consumers that they're competent enough to protect the sensitive information they're collecting from drivers. They'll also have to make sure this information is being backed up in case it's ever called upon later down the line.

To fill this gap, new companies aiming to be the 'middleman' between UBI information collection and the insurance companies are now positioning themselves as third party data collectors and data analysts that plan to develop proprietary "driver scores" similar to businesses that generate credit scores.

But how long will it be before insurance companies start to sell this information that's potentially worth tons of money to advertisers wishing to tailor their ads, direct mailings, and emails to specific types of drivers?

David Lukens, director of vertical markets at LexisNexis Risk Solutions, says, "There will be a tipping point where if most companies have this data, they're going to weigh the costs and benefits of sharing it."

Should You Refuse Monitoring?

take it or leave it

While there are definite benefits to tracking your driving with UBI devices (i.e. discounts for your car insurance), there's a big con to take into consideration as well: your privacy.

If you want to protect your privacy, "The first thing you want to look at is precisely what information the telematic device is capturing about the driver," said Paul Stephens, director of policy and advocacy at the Privacy Rights Clearinghouse.

Allowing our mobile devices, apps, or social media platforms to track our behavior has become more acceptable in our ever-connected world. But allowing the insurance companies to track every movement you make in your car is an entirely different kind of monster.

The debate about whether UBI devices will start tracking your whereabouts with GPS (Global Positioning System capability) has been heated. While Progressive says they neither have nor track GPS data, State Farm is connected to a large GPS-using system similar to OnStar. Even though representatives admit the geographical data isn't used against drivers, they still have the ability to locate where you were at a particular point in time.

If your device does track GPS, it will also be monitoring your social behavior, which many fear could be used against you. What if you leave a bar in the middle of the night and you're grouped together with other drivers who may be driving intoxicated, even though you're not?

GPS locations could even be subpoenaed during divorce proceedings to prove allegations of cheating.

"Everybody has their own threshold for what is right for them in terms of sacrificing their privacy versus saving money," Stephens said. "If you're the sort of individual who doesn't care at all about that kind of thing, sure, go ahead and get the discount. On the other hand, if you're someone who places value on keeping the things you do in your life private, you might want to give a second thought to selling your data to an insurance company for a discount."

Final Takeaway

It won't be long before every major auto insurance company in the US starts a UBI program. In fact, research predicts that 36% of businesses will be using telematics by 2020.

The technology keeps getting better, which will make the devices more efficient at collecting sensitive driving data. However, this means more drivers will have to start paying attention to the big and little mistakes they're making on the road if they wish to qualify for safe driving discounts.

If you can get over the idea of your data being collected and stored somewhere, you should consider giving UBI a try to see if you can lower your auto insurance rates.

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