DRIVING FOR DOLLARS

WASHINGTON — For decades insurance companies have been searching for some device, some magic lens that would somehow tell them exactly how much risk each policyholder represents. If they knew that, insurers could price their coverage more accurately and, they say, more fairly.

Absent such a magic lens, carriers slice and dice their policyholders into broad groupings — by age, by sex, by location, by miles driven. These groupings, experience has taught the companies, provide a good gauge of risk, at least on the average. Middle-aged woman in a small town? Low premiums. Teenage boy in an urban area? Get out your wallet.

This way of looking at policyholders works reasonably well in general, but of course drivers in these groups do vary, so that in this pricing model those at the safer end of the scale pay more and those at the riskier end pay less than their actual behavior would justify.

Is there a technological fix for this? One big insurer, Progressive Direct Group of Insurance Companies, thinks there might be, and for the past decade or so has been running experiments to try to ferret it out.

Beginning in Texas in the mid-‘90s, then more recently in Minnesota, the company has invited drivers to let it hook various gizmos to their cars that would record information about their driving. What if we knew, the company’s experts wondered, when, where, how fast and how far you drove? Could we really gauge a driver’s risk and price it precisely?

And the answer is — um, we need more information.

Early findings in the voluntary program suggest there may be enough there “to augment today’s pricing models,” making the company “willing to continue the research effort to find out exactly what’s there,” said Dave Huber, product development manager at Progressive.

So Progressive is now inviting its customers nationwide to install a small device it has dubbed TripSensor on their cars, allowing it to record how often the cars are driven, when and how fast, plus data on acceleration and braking.

The device plugs into the onboard diagnostic port, which all 1996 and newer cars are equipped with, Huber said. He hopes to have 15,000 cars in the program.

Already, the company has made a couple of suggestive findings.

First, the program appears to influence driver behavior. When a motorist knows that he can save money on insurance by slowing down and cutting his mileage, it seems he’s likely to do that — potentially improving safety.

The second finding is that the current geographic rating system — basing your rates in part on where you live — works pretty well. On the other hand, getting detailed information about exactly where you drive doesn’t help much.

More important for the rest of us, if this program works and other companies copy it, and it really does influence behavior, we may all be safer on the road.