Conventional rating systems on Auto Insurance Usage Based are primarily based on past realized losses and the past record of other drivers with similar characteristics. More recently, electronic systems have been introduced whereby the actual driving performance of a given driver is monitored and communicated directly to the insurance company. The Auto Insurance Usage Based Company then assigns the driver to a risk class based on the monitored driving behavior. An individual, therefore, can be put into different risk classes from month to month depending upon how they drive. For example, a driver who drives long distance at high speed in one month might be placed into a high risk class for that month and pay a large premium Auto Insurance Usage Based. If the same driver drives for short distances at low speed the next month, however, then he or she might be placed into a lower risk class and charged a lower premium Auto Insurance Usage Based.
Norwich Union offered a type of telematic Auto Insurance Usage Based in the United Kingdom,discontinued in 2008, called Pay as You Drive. This system employed a combination global positioning system (GPS) and cell phone in a car to monitor driving performance and communicate risk factors to the insurance company. Drivers were offered a discount if they exhibited safe driving as Norwich defined it. Trials conducted by Norwich Union in 2005 found that young drivers (18 to 23 year olds) signing up for telematic Auto Insurance Usage Based had a 20% lower accident rate than average.
In the United States, Progressive Corporation has an Auto Insurance Usage Based program called MyRate. The program gives drivers a customized insurance rate based on how, how much, and when their car is driven. MyRate Auto Insurance Usage Based is currently available in Alabama, Kentucky, Louisiana, Michigan, Minnesota, Maryland, New Jersey and Oregon. Driving data is transmitted to the company using an on-board device. The device connects to a car's OnBoard Diagnostic (OBD-II) port (all automobiles built after 1996 have an OBD-II.) and transmits speed, time of day and number of miles the car is driven. There is no GPS in the MyRate device, so no location information is collected for Auto Insurance Usage Based. Cars that are driven less often, in less risky ways and at less risky times of day can receive large discounts. Progressive has received patents on its methods and systems of implementing Auto Insurance Usage Based and has licensed these methods and systems to other companies. Progressive has service marks pending on the terms Pay As You Drive and Pay How You Drive. Other Auto Insurance Usage Based Companies are offering telematic auto insurance products in Germany, South Africa, and Japan.
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