Auto Insurance:
Auto insurance (or car insurance, motor insurance) is an insurance that consumers can purchase for cars ,trucks, and other vehicles. Its primary use is to provide protection against losses incurred as a result of car accidents
Coverage level
By buying auto insurance ,depending on the type of coverage purchased, the consumer may be protected against:
· The cost of repairing the vehicle following an accident.
· The cost of purchasing a new vehicle if it is stolen or damaged beyond economic repair
· Legal liability claims against the driver or owner of the vehicle following the vehicle causing damage or injury to a third party.
Liability insurance covers only the last point, while comprehensive insurance covers all three. Even comprehensive insurance, however, doesn't fully cover the risk associated with buying a new car.
Due to the sharp decline in value immediately following purchase, there is generally a period in which the remaining car payments exceed the compensation the insurer will pay for a "totaled" (destroyed, or written-off) vehicle.
Public policy
In many countries it is compulsory to purchase auto insurance before driving on public roads. This is to protect third parties against the financial consequences of loss, damage or injury caused by a vehicle, Typically, coverage against loss of or damage to the driver's own vehicle is optional. Most countries relate insurance to both the car and the driver, however the degree of each varies greatly.
Pricing plans
Except for government-mandated liability insurance, most car insurance plans charge a premium based on several risk factors that are likely to have an impact on the frequency of occurrence or on the expected cost of future claims .The premium usually depends on the car characteristics, the coverage selected (deductible, limit, covered perils), the usage of the car (commute to work or not, annual distance driven), and the profile and driving history of the drivers(age, sex , marital status, traffic violations and accidents).
For mandatory liability insurance, in some countries risk factors are taken into account (giving varying prices) and in others a fixed rate is charged regardless of the individual circumstances.
Distance risk factor
Flat rate
Several car insurance plans charge a flat rate regardless of how much the car is used.
Reasonable estimation
Several car insurance plans relies on a reasonable estimation of the average annual distance expected to be driven which is provided by the insured. This benefits drivers who drive their cars infrequently.
Odometer-based systems
It is insurance pricing scheme based on odometer readings. The policyholder would purchase insurance to cover a certain number of miles driven. The beginning and ending odometer readings would then be printed on the insurance card, so that in the event of a traffic stop, and officer could easily verify that the insurance is current.
Critics point out the possibility of cheating the system by odometer tampering. Although the newer electronic odometers are difficult to roll back, they can still be defeated by disconnecting the odometer wires and reconnecting them later.
GPS-based system
In1998, progressive Insurance started a pilot program in Texas in which volunteers installed a GPS-based technology called Autograph in exchange for a discount. The Device tracked their driving behavior and reported the results via cellular phone to the company(1) policyholders were reportedly more upset about having to pay for the expensive device than were over privacy concerns(2).
OBDII-based system
In 2004, the company launched another pilot program to allow policyholders to earn a discount on their premiums by consenting to use its TripSense connects to a car's OnBoard Diagnotic(OBDI) port, which exists in all cars built after 1996. The discount is forfeited if the device is discount for a significant amount of time.
According to Progressive(4), the Trip Sense device record:
· Start time
· End time
· Miles driven
· Duration
· Number of aggressive braking events
· Number of aggressive acceleration events
· Speed at 10-second intervals
· Time and date of each connection/disconnection to the OBDII port.