A women driving a car with a cell phone hanging on the media console

Meet Your New Back Seat Driver, Your Auto Insurer

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Drivers willing to sacrifice privacy can get decent discounts on their auto insurance premium if they avoid lead foot and don’t brake too hard, but they’ll need to have their insurer ride shotgun.

You’ve probably seen television commercials for some of the offerings from NFL quarterback Aaron Rodgers pitching for State Farm to actress Tiny Fey promoting Allstate’s safe driving app.

Most programs provide a 10 percent discount against a standard policy’s price upon sign-up and reward good driving with additional discounts. Some states limit the initial reduction to 5 percent or less.

In California, a state known for its congested freeways, these driving discounts are not available. The California Department of Insurance does not permit the use of driving for setting rates. Privacy is their primary concern.

And it’s easy to see why critics call these programs “the spy in your car.” Insurer’s use a smartphone’s GPS or Bluetooth, or a device plugged into the car’s OBD-II diagnostic port to record data on acceleration, braking, speed, miles driven, and cellphone use while driving. 

Insurers say the discounts they offer through these tracking programs tie into an improvement in its loss ratio or the percentage of paid claims and expenses vs. premium earned. People who use the apps drive more cautiously, insurers say.

“When customers use SmartRide, they earn an average discount of 21 percent,” Teresa Scharn, an associate vice president at Nationwide, told The New York Times. “That’s directly correlated to the loss ratio improvement of 21 percent we see. We’re giving the 21 percent back to the customer.”

For now, these tracking programs are optional, but there may be a day when insurance companies will be watching every driver on the road and basing their billing on those observations.

“Like it or not, the world is going to that,” Jeffrey Lake, a Farmers agent in Grand Rapids, Mich. told the NY Times. Lake believes that most auto insurance policies will be usage-based in 10 to 15 years.

Read more about insurers’ apps monitoring your driving at nytimes.com.