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Car Insurance Companies Offer High Tech Ways For Discounts

BOSTON (CBS) -- Getting a break on the high cost of car insurance certainly sounds appealing. Now, more companies are offering a high tech way to get a discount.

Mathew Mangiapane installed a monitoring device provided by his insurance company.

"I plugged it into my car and based on my driving, I was able to reduce my insurance by 29 percent," he said.

These programs are referred to as 'Usage Based Insurance.' It's a voluntary program now offered by 18 major insurers, including Progressive, State Farm, and Nationwide.

Driving data is wirelessly transmitted back to the insurance company in real time.

Insurance industry spokesman Bob Rusbuldt explained, "If you're a safe driver, if you're not stomping on the gas pedal and slamming on the brakes and swerving in traffic and exceeding the speed limit, you're going to get a better insurance rate than people who are unsafe drivers."

The device works two ways, however. The insurance company is also able to see any risky or dangerous habits. The question is how they will use data like that.

"What the insurance companies are saying today is you will not get a higher premium by entering this program and your driving habit now showing that you don't qualify for the premium discount," said Rusbuldt. "You'd be in the regular underwriting pool. Now, will that change in the future? I think the jury is still out."

Rusbuldt thinks programs like this are a better way to set rates. "Right now, insurance companies use a whole host of other factors in determining the price of your premium; your age, your gender, your marital status, your credit reports. This actually only takes into account one thing: that is your driving habits."

Privacy experts are concerned that insurers will have access to a lot of personal information by tracking a driver's habits.

Pam Dixon of the World Privacy Forum added, "First, do they use GPS? Second, does any third party have access to the data, like advertisers and marketers? And then third, can those records be subpoenaed? The answer is almost always yes."

Some companies may allow drivers to opt out of location tracking. It is important to read all the terms and conditions of any program.

Matthew is happy he signed up. He's now saving $50 a month.

"It was worth it to me," he says.

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