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Detroit Free Press Brian Dickerson Column: GMAC Will Make It Pay to Drive Less

Jul 17, 2007

By Brian Dickerson, Detroit Free Press

Jul. 18--No one would ever mistake me for a technophile. Mention any quantum leap in digital technology and I'll give you a list of ways it has ruined my life.

But even a Luddite like me has to marvel at the speed with which technological innovations designed for one purpose morph to meet needs their inventers never anticipated.

And so it is that OnStar, a 21st-Century option conceived to promote the sale and safe use of automobiles, soon may provide motorists with yet another incentive to drive less.

General Motors Corp., whose OnStar division offers an array of services ranging from remote door unlock to restaurant recommendations, announced this week that it would begin offering auto insurance discounts to policyholders who agree to let OnStar share their mileage data monitor with GMAC Insurance, the company's 49%-owned subsidiary.

Policyholders who currently pay $800 a year for their GMAC coverage would be eligible for discounts of up to $432, depending on how infrequently they backed their OnStar-equipped vehicles out of the garage. Even those who drove as many as 15,000 miles a year could qualify for a $101 discount.

Documenting Sunday drivers

Actuarial studies have long confirmed that motorists who drive fewer miles tend to be involved in fewer accidents. The challenge in translating this truism into advantageous insurance rates lies in verifying policyholders' descriptions of their own driving habits.

GM's inspiration was to realize that OnStar's global positioning satellite technology gave GMAC a reliable, low-cost way to measure the actual mileage of GMAC policyholders, allowing those who drive less to share in GMAC's reduced underwriting costs. If this cooperative undertaking leads more people to subscribe to OnStar and purchase GMAC auto policies, well, that's just a chance GM will have to take.

For now, only motorists who sign up for both OnStar and GMAC Insurance can take advantage of the incentive. But it's just a matter of time before other insurers and navigation system manufacturers pair up to offer similar deals.

What's good for GM?

The problem, if you sell cars and trucks for a living (or the benefit, if you're more concerned about reducing global warming and the consumption of fossil fuels) is that the insurance discounts GMAC is hawking will give motorists already smarting from the soaring price of gas one more incentive to drive less.

For instance, savvy policyholders who drove just a little more than 15,000 miles last year may begin looking for ways to shave the 15 or 20 miles a week that will move them into a lower insurance rate bracket.

This is precisely the sort of behavior you want to encourage if you sell walking shoes, seek government funding for public transportation, or aspire to reduce America's dependency on oil-rich adversaries abroad.

But to the extent that motorists respond to the invitation to save money on their car insurance by driving less, GM and other automakers may find themselves asking OnStar to suggest an alternate route to higher profits.

Contact BRIAN DICKERSON at 248-351-3697 or bdickerson@freepress.com.

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