What is Behavior-Based Insurance?
Behavior-based insurance is a subset of usage-based insurance where companies use telematics to collect data on your driving habits and determine how much you pay. It is becoming increasingly popular with consumers as more insurers begin to offer telematics programs. In fact, according to a 2023 JD Power auto insurance study, customer participation has doubled since 2016.
How does BBI work?
Insurance companies that offer behavior-based insurance use a plug-in device or a mobile app to look at your driving habits behind the wheel. These driving behaviors often translate into a driving score that, depending on the company, can affect your insurance premiums either in real-time or at renewal. Some insurance companies may apply a discount to your policy based on your driving data in the current term, while others may adjust your premiums when your policy renews. Some insurers may raise your rates on renewal if your driving data warrants it, so be sure to ask your insurance provider if BBI can raise your rates.
Common Driving Habits Tracked
Common driving habits tracked via telematics include:
- Speeding
- Acceleration
- Hard braking
- Hard cornering
- Phone use
- Time of day you drive
- Number of miles you drive
Since safer behaviors on the road lead to fewer accidents, insurance companies reward drivers who have good driving scores. What classifies as a good driving score varies by company. But typically, the safer you drive, the more money you can save on your car insurance premiums. Likewise, if your driving score reflects riskier behavior on the road, you may lose a discount or see an increase in your car insurance rates.
Advantages of BBI
There are a few notable advantages of enrolling in a behavior-based insurance program.
Safe Driving
A telematics program promotes healthy driving behaviors by rewarding you for driving safely. The more safe drivers on the road, the fewer accidents, which makes the roads safer for everyone. Ptolemus Consulting Group cites a 50% reduction in car crashes for drivers enrolled in a behavior-based insurance program.
Lower Premiums
Lower premiums are one of the biggest benefits of purchasing a behavior-based insurance policy. Policyholders can save between 10%-30% on their insurance premiums, depending on the provider. These programs can be very advantageous for individuals who already exhibit safe driving habits, as they can save money just by driving as they do normally.
Promotes Equity
UBI programs often help to promote equity among drivers because your auto insurance rates are based on how well and how much you drive, instead of other factors that can be viewed as unfair. Factors such as a driver’s credit score, occupation, or education level have historically been used in the insurance industry to determine your price, but they have the potential to be unfairly discriminatory. Usage-based car insurance, such as behavior-based insurance can even the playing field by factoring in your actual driving data, which is a better predictor of your risk of accidents on the road.
RELATED: Factors That Affect Car Insurance Rates
Disadvantages of BBI
While behavior-based auto insurance can help most drivers save money, there are some disadvantages customers should consider before enrolling.
Data Privacy
Insurance companies collect telematics data to view your behavior as a driver when providing behavior-based insurance. For example, your phone or plug-in device routinely sends location data to your provider. How they choose to use this data is dependent on the insurance company’s data privacy policy.
Premium Increases
While most insurance companies collect data for discounts, some can use this information to increase your rates as well. If you consistently speed or hard brake, for instance, your car insurance rates may increase to match your level of risk on the road. These price changes rarely happen in real-time, but are generally reflected on your renewal.
Driver Miscategorization
One of the downsides of a behavior-based insurance policy is that the telematics data might have difficulty distinguishing between drivers. If you and your partner are on the same auto insurance and they use your car, the plug-in device may not be able to tell the difference. Similarly, if you are a passenger in a car, your mobile app may assume you are driving. Some telematics devices may allow you to categorize yourself as either a passenger or a driver, but others do not. This can lead to incorrect data and potentially higher premiums.
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BBI versus UBI
Usage-based insurance (UBI) is a term to describe a telematics program where insurers base your premiums on how much you drive. It is sometimes referred to as a pay-as-you-drive or pay-per-mile insurance program, which tracks the frequency and duration of your trips. Drivers with low mileage will find this telematics program worth purchasing as they only pay for their time on the road.
Behavior-based insurance (BBI) is a more specific telematic program that focuses on how well you drive. While both programs use a plug-in device or smartphone app to view driving data, only BBI looks at speeding, hard braking, cornering, and other driver behaviors to base rates.
Is Behavior-Based Insurance Worth it?
Drivers practicing safe habits may find value in behavior-based insurance as it allows them to save money on their auto insurance policy by maintaining their regular driving behavior. If they routinely exhibit safe driving habits on the road anyway, they have little to lose.
Conversely, drivers prone to speeding, hard braking, cornering, or other risky behaviors may want to stay clear of behavior-based insurance. Not only will they not benefit from lower premiums, but their base rate may ultimately increase as a result.
Behavior-based insurance may also be worth it for those looking to encourage safe driving behaviors. Parents of teenage drivers, for example, may use behavior-based insurance to incentivize their children to drive safely and save money on their teen's premiums.
Is Behavior-Based Insurance Right For You?
Behavior-based insurance or other telematics programs may be right for you in the following scenarios:
- You are a safe driver
- You have a smartphone and are willing to download a mobile app or install a plug-in device
- You have poor credit
- You are working on improving your driving record
- You live in a high-risk area
- You want to save money on your car insurance
- You are ok with sharing your data with your insurance provider
Telematics insurance is ideal for safe drivers, especially those with bad credit or poor driving records who are looking to save money and don’t mind installing an app or device to share their driving data.
Safe Drivers Can Save Hundreds on Car Insurance With SteadyDrive
Safe drivers can also save money with SteadyDrive. SteadyDrive is a mobile app that uses proprietary technology to score your driving skills and help you secure discounts on your auto insurance policy.
SteadyDrive analyzes factors such as braking, speed, phone usage, and location to offer potential savings of hundreds of dollars annually for safe drivers.
Unlike with BBI, your SteadyDrive driving scores remain private and are not shared with insurers unless you authorize it.
If you’re 18 or older with a U.S. driving license, download the free SteadyDrive app for easy setup and potential savings.
RELATED: How SteadyDrive Can Save You Money
Additional Readings:
- Texas Car Insurance Discount for Safe Drivers
- Georgia Car Insurance Discount for Safe Drivers
- Kentucky Car Insurance Discount for Safe Drivers
- Missouri Car Insurance Discount for Safe Drivers
- Pennsylvania Car Insurance Discount for Safe Drivers
Disclaimer:
SteadyDrive is not an insurer or an insurance agent or broker. SteadyDrive does not provide you with an insurance policy, so make sure that you have insurance coverage while you drive. Please contact your insurer or an insurance agent or broker (if applicable) directly regarding questions you may have pertaining to auto insurance coverage. For more details, see SteadyDrive’s Terms of Service.
Safe drivers can save hundreds per year on car insurance
