The COVID-19 crisis has helped to change driving habits. Some people will continue to work from home, delivery services will continue to thrive and vacation time may be spent closer to home.

As I explained previously, major auto insurance companies recognized quickly that they were seeing lower claims activity, and determined that this reduced expense (increased profit) should be shared with customers. They issued dividends to all of their auto insurance customers.

They also believe driving habits have changed permanently and have filed with state agencies to reduce their rates permanently, or until driving habits change again. There is an understanding that auto insurance rates are based on driving habits of people.

What actions should you take to reduce your individual rates? This question was simply answered for years: don’t wreck, don’t drive many miles, don’t let your children get their drivers licenses until they are 25.

This was the only data the insurance industry could collect accurately.

This all changed with the creation of telematics, an interdisciplinary field that encompasses telecommunications, vehicular technologies, for instance, road transport, road safety, electrical engineering and computer science.

Telematics enables insurance companies to collect data on individual vehicles and driving habits of their clients. Not only do we know how many miles are driven, but how fast they where driven; how many times the brakes where applied; how many right and left turns where made; what time of day vehicles where driven; and how fast they accelerated.

This data, plus much more, is run through a computer program that compares the accident history of drivers with similar habits. This information enables insurance companies to offer different rates for different drivers.

To participate in telematics, you must have a device that can measure driving habits and a device that can transfer that information to your insurance companies.

The ideal device for transferring information to your insurance company is your smartphone. The device for measuring your driving habits is provided by your insurance company and is commonly referred to as a beacon.

The reason the smartphone is ideal for the transferring is that it enables you to see your driving habits and make changes to them to help reduce your rates. It also allows you to monitor the driving habits of other members of your household. (Remember that teen driver I mentioned earlier.)

Your smartphone enables your insurance company to provide information back to you.

Lower rates is the main reason to participate in telematics. Most insurance companies give a 10% discount to sign up for its telematics program. Safe drivers can earn as high as 40% off.

The second reason is safety. I have repaired and replaced many vehicles in my 45-year career as an insurance agent. What I can’t do is replace a life.

Some customers don’t participate in telematics because of concern that big brother is watching them and their rates will go up. If you own a smartphone or drive a newer car, big brother is already watching.

As for rates going up, that depends on your insurance company. Call your agent and ask how his or her program works. Many companies use telematics only to provide discounts, but you need to confirm how your company’s program works.

Telematics is voluntary, but I firmly believe it will be the future of car insurance. Get ahead of the game and participate now.

Bob Hollick is a State Farm Insurance agent based in Washington. His column now will appear every other Thursday in the Observer- Reporter.

To submit columns on financial planning, investing or business-related matters, email Rick Shrum at rshrum@observer-reporter.com.

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