Iowa City, Iowa — University of Iowa researchers are studying the electronic gadgets car insurance companies are asking customers to install in their vehicles to monitor driving habits.
Richard Peter, a UI professor of finance, says the devices are typically provided by the insurance company to promote safe driving, and they usually bring significant discounts on insurance premiums. That sounds like a win-win, right? Well, Peter says, no.
While the devices were introduced in the late 1990s, few drivers are installing them to take advantage of the cost savings. Peter says only about five-percent of motorists in the US are using the tiny monitors, and he’s considering the reasons why they’ve never caught on.
The sensors monitor a driver’s actions and use algorithms to create a score that’s the basis for how large of a discount the driver may receive. Safer drivers will save more money. Still, it’s not a perfect system, as your score may be dinged if you slam on the brakes.
That algorithm may be too complicated for some people to follow, and Peter suggests policyholders fear they’ll be misclassified as a bad driver even when they’re driving safely, which is why many people may pass on the devices.
Peter says a German insurance company quit using the devices after its customer service lines were flooded by drivers calling to explain their driving behaviors which may’ve registered on the device as erratic. The UI study will be published in the Journal of Risk and Insurance, the flagship journal of the American Risk and Insurance Association.
