Why are usage-based insurance rates lower

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With a GPS system attached to each insured vehicle, insurance companies are able to charge usage-based insurance rates," depending on how (e.g., hard breaking, fast acceleration), how much (mileage), when, and possibly where the insured vehicle is driven. Autograph (then associated with Progressive), a rm that was awarded a U.S. patent in 2001, was shown to save policy holders in Houston an average of 25% of what they were previously paying. (i) Why are usage-based insurance rates lower than at-rate insurance fees? Give two separate reasons and explain.

Reference no: EM13153397

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