Cut your carbon and save on auto insurance

Here’s another example of how the tortoise beats the hare. The insurance industry is starting to offer lower rates for drivers who drive less, apply a light foot on the pedal, and avoid sudden stops. These driving habits save fuel and reduce carbon emissions. They also cut down on accident risks and the resulting insurance claims. Now technology is helping insurance companies identify such conservation-minded drivers and reward them with lower premiums.

To get the benefits, drivers have to agree to put a device in their car (it plugs into the same diagnostic port as the ScanGauge) that tracks driving patterns. Every six months, participants must upload the collected data and send it to the insurer. A more advanced system can transmit the information wirelessly. There’s no GPS tracking involved, which the insurance companies say should allay privacy concerns (although some drivers may not be convinced).

Two big insurers offering the pay-as-you-drive discounts in selected states are Progressive (via the MyRate program) and GMAC Insurance (via the Low-Mileage Discount program in association with OnStar). Researchers at The Hamilton Project of the Brookings Institution report that broad adoption of such programs could reduce driving by 8% nationwide, with comparable CO2 reductions. Average savings for participants could be $270 per car per year.

Pay-as-you-drive insurance would probably be more common were it not for restrictive state regulations. Each state has its own insurance rules, which often limit innovative pricing programs. A bill pending in California would open up this feature to drivers in the state with the most cars. You can support the legislation here.

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  1. Robert J. Cohen - July 25, 2008

    Even if you’re not able to access these new insurance programs: if you cut down on your annual mileage, and/or stop driving to work or on business, make sure to report that to your insurance agent. There are usually breakpoints below which you’ll enjoy lower rates while you emit less carbon.
    While you’re talking to your agent, consider raising your collision and comprehensive deductibles to your point of maximum risk tolerance; you’ll save money in the long run, probably drive more cautiously to avoid accidents, and not tarnish your record with small claims. Insurance is for protecting against major losses; self-insure the small stuff and pocket the profits for yourself.
    You could even spend some of your auto insurance savings on other win-win expense and carbon reducers at home, like power strips and a programmable thermostat.

  2. Keoni Morrell - July 25, 2008

    There is NO way that I would install one of these puppies in my car. NO way.
    First, why do you think the insurance companies are doing this? WRONG! It is not because they’ve suddenly become tree hugging environmentalists. That does nothing for their bottom line. Rather, they are trying to convince tree-hugging environmentalists that a device that monitors their driving patterns is a good thing. Sure they might save a few bucks on premiums, but if said environmentalists get into an accident, the insurance companies can then use the data from that device to determine fault. Got hit by a drunk driver? Sorry, you were going 5mph over the speed limit, claim denied! Yes folks, Google the cases recently in which the insurance cos. have used the “black boxes” already found in many autos to deny people’s claims. This is nothing but a revenue grab disguised in some enviro-friendly package. And Terrapass fell for it.

  3. Adam Stein - July 26, 2008

    First, why do you think the insurance companies are doing this?
    Because it saves them money. Why else would they?
    WRONG! It is not because they’ve suddenly become tree hugging environmentalists.
    Oh….we assumed that AllState had been infiltrated by a sleeper cell of Earth First activists.
    Hey, it looks like Environmental Defense has been suckered as well. Here’s a crazy thought, though: what if providing incentives for safe driving happens to be good for the environment and for insurance companies and for drivers?

  4. Pradeep - July 26, 2008

    @Keoni Morrell:
    I see your point; but want to point that the whole point of this is “you pay as you drive”. If I am not a “safe” driver, then the probability that I will be involved in an accident is higher than the median for the population. I then think that it is logical for me to pay more insurance to drive around.
    A major assumption underlying the article is that providing incentives for safe driving is good for the environment, drivers and the insurance companies.
    I can see how braking less abruptly and applying a light foot on the pedal will lead to lesser probability of accidents and also will be good for the environment. This will reduce costs to the insurer, and also will be beneficial to the driver and the environment. However, I do not think that the case for the third point (driving less leading to lesser accidents) is very strong. I agree that driving less will lead to lesser accidents, but the whole point of getting insurance is to ensure that I am covered in case of an accident (For ex: my driving habits alone will not avoid accidents, I cannot control how the driving habits of other persons). I think that a better metric would be how many miles lesser I drive now given that I have to commute x miles to work etc. In other words, the insurance company should measure how my driving behavior has changed; not what it will be/is.

  5. Lauren Navarro - July 28, 2008

    As a co-sponsor of the bill this post refers to (AB 2800), I wanted to let you know that the bill is limited to mileage, and does not include anything about braking, acceleration, etc. Moreover, mileage verification can be done without putting any sort of technology on your car.
    Lauren Navarro
    Environmental Defense Fund

  6. Adam Stern - July 29, 2008

    Lauren: You make a good point. Thanks for clarifying the content of the California bill. Getting rid of anachronistic rules that preclude mileage-based insurance rates is an important step. Still, some drivers may find that they can save more gas and more carbon by having a monitoring device in their car. As some commentators have observed, insurance companies may need to do more to address privacy concerns. See TreeHugger survey on this issue in which half the respondents say this is “the thin edge toward total surveillance.”
    To clarify another issue, you can use a ScanGauge without any involvement from your insurance provider.

  7. K at Watchdog - July 29, 2008

    The main problem I have with installing mileage tracking (as well as other action tracking) devices in peoples’ cars is that insurance industries have not adequately prepared to assess and administer discounts truly rewarding any attempt to drive less. Instead of creating multiple tiers or discount ranges so as to encourage even those who drove infrequently to drive even less (because the eventual goal is to ween us off driving completely, is it not?), many companies have created a single above or below mileage standard (e.g greater or less than 7500 miles), whereby those people who are more than a couple of hundred miles away from the standard have no incentive to reform or alter their driving habits. In fact, because those that drive considerably more than the tier level do not receive any penalties for “increasing risk” on the road, no reason exists for them to change their habits; convenience may also cause some of these individuals to drive more simply because they know they can never reach the relatively low tier set by their insurer. And the person who drives 4000 miles under this plan may in fact increase his mileage simply because he knows it will be difficult for him to reach the 7500 plateau. Basically, the massive green implications of putting Pay as you Drive technology in ones’ car (where privacy issues already abound) is nullified by the insurance industry’s lack of true acknowledgment of those who do less harm to the environment. And to the co-sponsor of the bill from EDF, I noticed that Progressive has been extremely vocal about its panoply of driving actions tracked in other states; what makes you so sure the same cannot and will not happen? And you also bring up a good point: mileage driven is already a part of the CA rate equation and can be done without installing technology, so why do we need these devices in the first place? We do currently possess these nifty, untamperable, technology-based contraptions called odometers..

  8. Chad - July 30, 2008

    I agree with Keoni in some ways: what is going to kill these schemes for now is our ridiculous speed-limit laws, which are about the only laws in the country that are written with the expectation of being broken.
    Almost all drivers speed some of the time and at least eighty percent drive consistently a few over the limit as a matter of course. We wouldn’t want to be recorded doing this for any number of legal reasons.
    If speed limits were written as zero-tolerance numbers that reflected border-line dangerous driving, and the expectation was that you were to drive 5-10 mph UNDER the limit, these devices might just work.

  9. dan - July 30, 2008

    there are some good comments on here. I agree in part with Keoni. Regardless of what the insurers try to tell you about the benefits, they all see $ only and I don’t trust any insurer. Period.
    I do try to drive a little under the speed limit, my Prius gets about 53mpg at 63 or 64 and 44 at 72/73, so that’s my incentive. But driving slower can be dangerous, it just flat out chaps many, many people off. light on the pedal? ease up on the gas for a red light? this just makes people get road rage sometimes (many times actually). So I agree with the 0 tolerance on speed limits. I think that they should have cameras and Radars everywhere, like I’ve heard that VA does and that I think that GA does in a few places.

  10. Madhu - July 30, 2008

    There seems to be one great anomaly when teaching good driving habits to new drivers i.e. the very basic rule that slower drivers SHOULD NOT drive on the left extreme lane, whether on a highway or on a city road.
    This road discipline is strictly enforced all over Europe and makes driving so much easier AND minimizes road rage / dangerous driving practices. (Based on my experience of driving 29 miles each way on the horribly congested Washington Beltway for the last 25 years).

  11. Chad - July 30, 2008

    Dan, based your mpg numbers, you are saving 1.8 gallons per hour of extra driving. Do you really value your time at $7/h? This is people get “chapped off” by slow drivers. While driving slower does save gas, for most people most of the time, it doesn’t even come close to saving enough to justify the extra time you spend on the road. There are better ways to help the environment than to spend your time at such a low-value activity.
    Madhu, you are correct. It is imperative that slow drivers stay to the right. One of the most dangerous situations I see on expressways is when slow drivers move to the middle, forcing average drivers to the left lanes, which forces fast drivers to pass everyone on the right.

  12. Dani - July 30, 2008

    Well, although I agree that an incentive to drive safely and decrease the amount of carbon emissions it does nothing for me or my carpool partner. My family only owns one car, and carpool (friends car) 45miles round trip 5 days a week. Of course, neither one of these activities gives me a discount on my insurance.

  13. rghins - August 20, 2008

    “Here�s another example of how the tortoise beats the hare.” this post has undoubtedly signifies the truth. The processes mentioned here are really good from drivers as well as auto insurance sector’s viewpoint.

  14. Fairy - November 22, 2008

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