Nationwide recently announced the launch of SmartMiles, a new auto insurance policy targeting low-mileage drivers. SmartMiles uses a pay-per-mile model, ideally saving drivers on their insurance premiums while providing the same coverage as a traditional auto policy.
The firm first entered the telematics space in 2011 with SmartRide, a program that rewards safe driving habits like smooth braking, following the speed limit and daytime driving with up to a 25% discount. SmartMiles expands Nationwide’s telematics offerings but is specifically intended for drivers who infrequently use their vehicles or only drive a short distance each day.
A new SmartMiles page positions the product as ideal for low-mileage drivers, including those who live and work downtown, work from home or have an extra car. A small device plugged into the vehicle tracks how many miles the car is driven and records data on the SmartMiles portal.
Base and variable rates calculated by the number of miles driven determine users’ premium amounts. Other features of the policy include up to a 10% discount for safe driving, a road trip exemption that caps daily mileage at 250 miles, online access and communications including biweekly emails. Currently, the program is only available in Illinois but is expected to expand to additional states throughout 2019.Telematics programs are becoming more common in the auto insurance industry with both startups and traditional insurers leveraging the technology. Twelve P&C Insurance Monitor coverage firms currently offer telematics programs.
The addition of SmartMiles to Nationwide’s telematics offerings makes it stand out among other insurance firms. SmartMiles combines aspects of UBI with other telematics factors, such as patterns of braking and use of phones, creating a more customized product. Nationwide also allows households to mix-and-match the SmartMiles and SmartRide programs to best fit driving habits among family members. Lastly, the new program exemplifies the impact of startups entering the insurance space on traditional insurers, encouraging them to keep up with market trends.
Telematics programs benefit insurance companies, drivers and society as a whole. Insurance companies can collect extensive data to more accurately price insurance premiums and make improvements to their products. Low-risk, low-mileage and lower-income drivers also benefit by saving money on auto insurance and receive incentives to adopt better driving practices. As a result, there may be reductions in accident rates, claims activity, congestion and carbon emissions.
At the same time, tracking driving behavior has raised privacy and security concerns, resulting in regulations and legislation about the disclosure of information. Barriers to adoption pose additional challenges for firms, including potential driver resistance and costs associated with implementing telematics programs like developing the technology and employing research and data specialists. However, studies have indicated that telematics programs will be a continuing trend among insurance and insurtech firms to provide customers with customized auto insurance rates.