New York’s Department of Financial Services (DFS) issued a bulletin to all New York auto insurers encouraging them to adopt “usage-based insurance” (UBI) programs.
Under these voluntary programs, consumers can install “telematics” devices in their cars that – with the consumers’ consent – catalog data on their driving habits and provide discounts to those found to be more careful drivers.
DFS said a telematics device, when installed in a driver’s vehicle, can record and upload various forms of data pertaining to driving patterns, such as a driver’s acceleration and braking patterns, the number of miles a vehicle has driven, and the time of day a driver drives.
DFS said insurers can use the data to provide discounts to already careful drivers, who are less expensive to insure. At the same time, UBI programs give less cautious drivers the incentive to drive more carefully, which can help reduce auto accidents. DFS said that as more customers gain better driving habits, an insurer can experience lower overall costs, which could lead to lower auto insurance premiums statewide.
DFS Superintendent Benjamin Lawsky said telematics programs can be a win-win for insurers and drivers. “They can save policyholder money and save lives by making our roads safer,” Lawsky said. “We encourage all New York auto insurers to submit plans to our Department making use of this innovative technology.”
DFS said it is committed to the protection of consumer privacy and has approved UBI programs only where they are offered to consumers on a voluntary basis.
The precise contours of existing UBI programs vary. Some require installation of a telematics device for a set amount of time in exchange for a fixed discount; others require such installation for the duration of a policy period in exchange for a periodic rate adjustment.
DFS said one innovative telematics program that DFS has already approved at Esurance helps parents prevent their teenagers from texting and driving.
Under Esurance’s voluntary program, policyholders may install an in-car device into their teen’s car that, in conjunction with an Esurance app installed on their teen driver’s phone, can limit the use of texts, emails, applications, and phone calls while driving (with the exception of 911). The device can also catalog driving behavior, including speeding, hard braking, fast acceleration, and other activities.
DFS has also approved telematics programs offered by a half-dozen other insurers including, Allstate, Allianz, the Hartford, Progressive, State Farm, and Utica National. Regulators said programs from additional insurers are currently under consideration.
Commenting on the DFS bulletin, the New York insurance Association (NYIA) said usage-based insurance is a great optional program.
“The New York insurance Association believes usage-based insurance is a great optional program that can be employed by insurers and policyholders,” said NYIA President Ellen Melchionni. “It is key for these types of programs to not only be voluntary for consumers, but also insurance companies.”
Melchionni said greater choice in the New York insurance marketplace increases competition and benefits the state’s residents.
“We encourage the Department of Financial Services to continue to embrace innovation within the property and casualty insurance industry. Enabling companies to bring new products to market quickly makes New York a more attractive place to do business,” Melchionni said.