The automobile has often been linked to an American's sense of individualism and freedom, but get behind the wheel these days, and you're likely surrendering a lot more liberty than you realize.

Your insurance company wants to keep an eye on where you're going, what you're doing, and how you're driving. Couched in terms of wanting to save you money -- they'll often give you discounts for putting yourself under the microscope -- it doesn't take much imagination to see your car insurance rates rising because of your "risky" or "dangerous" driving behavior.

I've got my eye on you
Car insurers like Allstate and Progressive are deploying technology known as telematics, which monitors your driving habits such as mileage, braking, speed, and time of day when you're driving.


Allstate gives you a fat 10% discount to enroll, then after six months, it switches over to a system based upon safe driving habits. It says the average discount realized is about 14%, and now they offer a smartphone app so you can get near real-time feedback. Progressive, which pioneered the concept, says it gets a huge advantage because it can target the safest drivers with discounts while leaving high-risk drivers to become someone else's headache.

That's likely part of the reason it offers the service to non-Progressive customers. In theory, it's promoting safer driving among all drivers, but the 30-day trial also allows them to see how much they could save with the discounts were they to become Progressive customers.

Although devices you install yourself in your car are the primary means of usage monitoring, Allstate just launched a smartphone app to give near real-time feedback.

Use it or lose it
According to the market researchers at Strategy Meets Action, as much as half of the personal auto market will be usage-based insurance by 2020. More than a dozen major auto insurance companies from Progressive and Allstate to State Farm, Travelers , and Nationwide are either testing or offering this feature already. Travelers' IntelliDrive program gives drivers the chance to save up to 20% on their premiums.

It should be something of a no-brainer for insurance companies, who are often left to parse a driver's credit score to determine rate premiums. Usage-based insurance gives them hard data they can point to based on actual driving experiences to set rates accurately. The trade-offs for drivers, however, are substantial.

Hard living lifestyles
I have a cousin that won't get an E-Z Pass transponder to pay tolls because of fears it will lead to tracking and perhaps tickets being issued after calculating speeds based on how long it takes to go between two toll booths. While I'm not part of the tinfoil hate brigade, I can easily see insurers of the future raising rates on the riskiest drivers. If you're braking hard, taking turns too sharply, or prone to suddenly accelerate, insurers will see such habits as incurring more risk for them -- and higher premiums for you!

Progressive says it doesn't monitor car locations anymore because that was a little too much like Big Brother even for them (or at least its customers), but despite such privacy concerns, the technology is expected to take off, and 2013 is the year when it gains momentum. 

Not for me, though. I prefer my anonymity while driving. While my insurer doesn't offer a UBI plan yet, I'd still pass it up if they did. But how about you? Would you be willing to give up a bit of your privacy to save a few dollars on your insurance premiums? Let me know in the comments box below! 

Ensuring the best outcome
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The article Big Brother Is Watching You Drive originally appeared on Fool.com.

Fool contributor Rich Duprey has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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