How auto insurers traditionally set rates can leave some people scratching their heads.
Andrew Rose cites a hypothetical situation, using as an example the Detroit headquarters of his employer, General Motors.
Two employees – one an auto executive, the other a janitor – work in the same building and share unblemished driving records free of traffic tickets, accidents and claims.
Yet, the executive gets a better premium rate. Why? Because he or she is higher up the employment pole.
“Insurance companies traditionally put people in classes – age, occupation, gender, credit score, education level,” says Rose, president of GM’s OnStar Insurance Services. “It’s often about who you are, not how you drive. It can result in inequities.”
OnStar Insurance wants to change that. It has rolled out a coverage program with rates based on participants’ tracked driving behavior in GM cars equipped with its OnStar connectivity system.
Good drivers get lower rates. “It is a fairer approach,” Rose tells Wards.
OnStar has come a long way technologically and otherwise since it began in 1996 by offering subscribers a range of services, from recommending nearby restaurants to giving directions to automatically notifying emergency services of an accident and its location.
OnStar receives about 150,000 calls a day and handles approximately 6,000 automatic crash responses a month.
Using GPS satellite and cellular systems, it has become a connectivity powerhouse, Rose says. “We have data off these vehicles that’s incredibly accurate. With OnStar, GM created ‘connected vehicles’ before the term was even coined.”
Under the new insurance program that uses algorithms and other technologies, subscribers consent to the tracking of their driving behavior. If it’s good enough, they’ll get better insurance rates through a white-label affiliate, American Family Insurance. (OnStar itself doesn’t directly offer insurance.)
Rate rewards are determined by factors such as whether a driver is wearing a seatbelt or accelerates and decelerates prudently.
The system also determines how many miles someone actually travels. “Insurers ask clients how many miles they drive, and they take a stab at it,” Rose says. “They’re usually wrong.”
The OnStar system also can determine whether a driver is traveling at a safe speed considering the traffic conditions. “There’s a difference between going 50 mph (80 km/h) on an open road and 50 mph in a school zone as classes are let out,” Rose says.
How does the system know a driver is inappropriately speeding in a particular place or situation?
“Because it can detect and compare the speeds at which other OnStar-equipped vehicles in the same area are traveling,” Rose says.
After a pilot program in Arizona, OnStar insurance now is available in 47 states, soon to be 50.
Presumably, only gold-star drivers would agree to sign up. “I wish that were the case,” Rose says. “It doesn’t work that way. A lot of people think they’re good drivers, but that’s not necessarily true. We have a program that helps them become better.”
At a GM inventor event in October, the automaker predicted OnStar Insurance will become an estimated $6 billion revenue opportunity by 2030.
Auto insurance may transform dramatically when autonomous vehicles make the scene. But that is a long way off. “As long as cars have a steering wheel and gas pedal, you will need insurance," Rose says.
He’s in on GM discussions about how the auto insurance sector will look in the future.
Of great concern is the transition period when non-autonomous and autonomous vehicles will share the roadways, he says. “Boy, that’s going to be messy.”
Steve Finlay is a retired WardsAuto senior editor. He can be reached at [email protected].
