In the future, will auto insurance pricing be trip-based?

| Nov 22, 2016 | Insurance Law

Not all driving routes are the same safety-wise. Some routes, due to the features they contain, the volume of traffic they have, the weather conditions prevalent on them or other factors, tend to be more dangerous than others. So, what routes a driver picks can impact how safe their drive is. Might it also someday have a big impact on how much they pay for auto insurance? Some recently filed patent applications raise this possibility.

Specifically, some major insurers have applied for patents for new types of auto insurance pricing systems that would be more trip-based in nature. In such systems, the specifics of the car trips a person takes, including the riskiness of the routes they pick for such trips, would be tracked and would impact the kinds of auto insurance costs the person would face.

Now, such trip-based pricing models actually going out into the market still seems a ways in the future. It will be interesting to see, if trip-based pricing does someday enter into the auto insurance market, what it will end up looking like. One also wonders if such a pricing system would have significant impacts on driver behavior, like how much drivers pay attention to the safety of the routes they pick.

Of course, changes in auto insurance pricing don’t just impact consumers, but insurance companies as well. One wonders what kinds of unique issues (including issues regarding the handling of claims and issues related to claims disputes) trip-based pricing for auto insurance would raise for such companies.

What are your thoughts on the possibility of auto insurance pricing being more trip-based in nature?

Source: USA Today, “Risky routes could be newest car insurance rate factor,” Alex Glenn, Nov. 14, 2016