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Slash Your Car Insurance Bills: How Your Smartphone Can Save You Money

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Apps and phones are tracking you anyway. May as well use it to save money on car insurance

According to JD Power, a data analytics company, auto insurance rates have risen to such an extent that many Americans might be open to giving up a bit of their privacy if it means paying less. This shift in attitudes could make 2025 a pivotal year for usage-based insurance (UBI).

Unlike traditional auto insurance that relies on historical driving records to set premiums, UBI calculates rates based on real-time monitoring of an individual’s driving behavior. This is done through telematics technology, often integrated into a smartphone, which tracks things like safe driving practices and mileage to potentially lower insurance costs.

Owners of Tesla vehicles, who purchase their insurance directly from the electric car manufacturer, are already familiar with UBI, as it is the only type of insurance Tesla offers. However, Stephen Crewdson, a senior director at JD Power, noted that UBI is becoming increasingly popular among a broader range of car owners.

“With auto insurance premiums surging by 30-40% on average over the past three years, consumers are actively seeking ways to reduce their insurance expenses,” Crewdson explained.

Potential Savings with UBI

According to Crewdson, customers who switch to UBI can generally expect about a 10% savings compared to traditional auto insurance policies.

“For families or individuals insuring multiple drivers, this could translate to several hundred dollars in annual savings, especially for those spending thousands on insurance each year,” he added.

Tracking Metrics of UBI

The National Association of Insurance Commissioners lists several driving behaviors that UBI programs typically monitor:

  • miles driven
  • time of day
  • location of vehicle use
  • rapid acceleration
  • hard braking
  • sharp turning
  • cell phone use while driving
  • airbag deployment
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Increasing Adoption of UBI

In 2020, 16% of individuals shopping for auto insurance were offered UBI, with 12% opting in, Crewdson noted. By 2024, though only 15% were offered UBI, the adoption rate had increased to 19%.

Despite fewer offers, the growing percentage of enrollees suggests that the push towards UBI is largely driven by consumer interest. “Many people realize they are already being monitored through their smartphones or apps, so they figure they might as well benefit financially from it,” Crewdson observed.

Is UBI Right for You?

If you’re a conscientious driver, log fewer miles than average, and don’t mind sharing some personal data, UBI could be a suitable option.

Crewdson also mentioned that UBI might encourage safer driving habits. “A recent study in 2024 revealed that 65% of participants received driving feedback, and 44% reported that they have improved their driving behaviors as a result,” he said.

JD Power reports that satisfaction levels for new UBI customers are, on average, 64 points higher on a 1,000-point scale than those who choose traditional insurance plans.

“The increase in customer satisfaction derived from UBI, combined with a rise in rate-driven shopping and the ongoing interest from insurers to attract new clients, are setting the stage for a significant boost in UBI adoption,” the firm concluded in its analysis.

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