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Would you let your insurance company track your driving habits if it might mean paying lower auto premiums? According to one insurer that’s providing such coverage, about one in three of its policyholders who are offered such a policy is accepting it.

Now offered by Progressive Casualty Insurance Co. in nine states, the company’s MyRate policy saves participating customers an average of 10 to 15 percent in premiums, the company says. To get the discounts, policyholders allow the company to set their rates using data collected by an onboard electronic device that tracks the miles and time of day the vehicle is driven, and even driving habits such as excessive acceleration or sudden braking.

Another pay-as-you-drive option is offered by GMAC Insurance Group in 34 states to policyholders who have the OnStar system in their vehicles. Under the company’s Low Mileage Discount Program, GMAC Insurance uses OnStar’s global positioning system capabilities to monitor vehicle mileage and usage of participating drivers.

Neither of the programs is yet offered in Iowa, and some insurers say privacy concerns may keep such programs from gaining widespread acceptance. However, the concept is attracting a good deal of attention in the industry, particularly as insurers seek to hang on to their best customers in a competitive environment.

“The argument for usage-based insurance is that it allows consumers to add their driving behavior to the rate-making process for auto insurance rates,” said Richard Hutchinson, Progressive’s general manager of usage-based insurance. “The benefits to such a program for the consumer is that if they can show that they don’t look like the average for the rating group used to derive rates, they can argue for more savings.”

Usage-based insurance could benefit the environment as well as highway safety, according to a 2008 study by the Brookings Institution that looked at offering a statewide option for California drivers. According to the study, usage-based policies would result in an estimated 8 percent reduction in overall miles driven and generate a 7 to 9 percent reduction in carbon dioxide emissions. It also estimated that nearly two-thirds of California drivers who participate would have lower premiums under such a program.

Iowa interest?

Though Progressive and GMAC Insurance have each said they plan to expand their programs into additional states, neither would disclose its plans for Iowa.

State Farm, the market leader in Iowa, insuring about one in five vehicles in the state, is considering offering such policies, said Ann Avery, a spokeswoman at the company’s Midwest regional office in Lincoln, Neb.

“State Farm is well aware of that technology,” Avery said. “We are doing research in this area. We are very interested in how it works, what its applications might be, and how consumers might react to this concept. But it is only in the testing stages.”

Des Moines-based EMC Insurance Group Inc. is also following developments in usage-based policies, but has no immediate plans to incorporate the technology into its policies.

“At this time, we do not see a broadbased demand for this type of pricing basis from agents and consumers,” said Ronald Iverson, assistant vice president and personal lines underwriting manager for EMC. “(We) feel that our current approach is fair and responsive to the majority of our policyholders.”

At this stage, the concept doesn’t seem to be well accepted in many parts of the country, Iverson said. “People like their privacy and don’t think when and where they drive is any business of their insurance company,” he said.

Bob Skow, CEO of the Independent Insurance Agents of Iowa Inc., said he believes such policies would be a tough sell in Iowa, in part because the state already has some of the lowest auto insurance rates in the country.

“No one wants to be that first company in Iowa to try it,” he said. “People are probably going to say, ‘I’m happy with what I’m paying,’ rather than finding out later what they may pay.” Skow echoed Iverson’s privacy concerns about the tracking required for the policies. “In a few discussions with our (agents), most said, ‘I don’t think many people would be too excited about the insurance company knowing my every move,'” he said.

No barriers

Tom Alger, a spokesman for the Iowa Insurance Division, said there are no state laws that would prevent a company from offering such policies in Iowa. Companies would simply need to file a form to receive state approval to offer the policies, he said.

At the same time, “we have not heard anything from any company indicating they intend to do it in the near term,” Alger said.

Policyholders who enroll in MyRate, which was first introduced in 2004, receive an initial 10 percent discount for the first six months. Their rate at renewal is then based on their actual mileage and usage patterns the company has tracked. Though Progressive advertises discounts of up to 60 percent, Hutchinson acknowledged “you’d virtually have to park the car to get that; 25 percent is the more realistic top range.”

Hutchinson said Progressive does not use data collected through MyRate in considering accident claims, unless the policyholder requests a review.

The company is testing several versions of the program, and expects to streamline the program to one national model early this year, Hutchinson said.

“Our take is, we won’t see it (accepted) instantly, but it could be a very good portion of the driving public that sees the advantage of this,” he said. “I think we’re excited about what the potential for growth is.”