By Aaron Crowe

Having a backseat driver offer driving tips and suggest you stop at the nearest doughnut shop doesn’t sound like much fun, especially if you’re trying to avoid eating doughnuts.

But that’s what will be happening this summer with OnStar, a service that allows General Motors vehicles to be digitally connected and receive roadside assistance, get directions and make hands-free calls, among many other services.

OnStar will monitor a driver’s actions in a voluntary program over 90 days to assess how safe they drive, and offer driving tips “based on a customer’s individual assessment characteristics,” according to GM.

Drivers can also use the car’s dash screen to see nearby merchants while driving, and can be directed to a nearby Dunkin’ Donuts, which OnStar has a partnership with, for a discounted doughnut.

Their driving behavior — though probably not the doughnut shop stop — can then be used to receive insurance discounts from Progressive Insurance’s Snapshot program. Progressive already offers safe driving discounts by collecting driving data through a plug-in device to a car’s diagnostic port, but this is the first time the technology will be integrated into the vehicle.

Going beyond Pay-As-You-Drive

OnStar’s connection to Snapshot goes beyond the pay-as-you-drive, or PAYD, where insurers base premiums on metrics such as braking intensity, speed, driving hours of the day, and miles driven in determining rates, says Eric Stauffer, a former insurance agent who reviews insurance companies. Changes in the PAYD marketplace are happening faster every month, Stauffer says.

“What started out as a way to simply track miles is turning into a data-gobbling machine,” he says.

The OnStar program will also provide predictive diagnostics, such as a message a few weeks early when a low battery is predicted, or if sensors in the starter motor or fuel pump indicate a slip in performance.

Drivers who want the assessment must enroll in the program. It will be available for all 2016 GM models, most 2015 models and select 2013 and 2014 models in the U.S.

Also called Usage-Based Insurance, or UBI, the most common variables measured are distance traveling, time of day you drive, and quality of driving such as through hard braking.

“Typically, they will require you to keep the device in your car for six months in order to qualify for any rate reductions,” says Christin Wiley, who runs an independent insurance agency in Tennessee.

“The companies that offer this technology have most often offered a trial period of 30 days for you to see if it will be beneficial to you to switch and move into the six-month tracking period,” Wiley says. “Most companies are not currently using the devices for rate increases, but I wouldn’t be surprised to see that in the future.”

PAYD drivers report saving less than the 30-40 percent reductions that companies advertise, says Stauffer, who has had drivers tell him they’ve seen insurance reductions of 10-15 percent. Most companies only offer discounts, meaning they won’t raise rates for poor driving.

“The interesting complaint I see over and over is certain devices draining the car battery,” he says.

The start of data mining

These programs are voluntary and so far only offer discounts for good driving behavior. It’s a first venture into data mining by companies that haven’t yet entered the uncharted territory of raising rates after measuring driving habits, says Josh Siegel, founder of Carknow.me, which builds a telematics device and works with insurers.

Using telematics to see if a driver parks outside or inside, or drives in safe areas, can help teach them to be better drivers, Siegel says.

“You understand how a driver drives and how safe a driver is, you can incentivize them to be safer drivers,” he says.

His company’s app offers other benefits drivers may want beyond insurance discounts. It can help predict when to close a window, based on if rain is forecast. Or maintenance and repairs can be suggested before your car is stranded. The cost of not doing those repairs can be weighed by the app against the fuel economy lost.

Metrics could also be used to offer discounts at nearby gas stations, for example, Siegel says, by offering coupons on an app when you’re nearby and your gas tank is half full and you wouldn’t normally be stopping for gas.

Apps regularly ask for a user’s location and for permission to track them when the app isn’t active. That could be a privacy issue drivers don’t want their insurance company to know about, says Paul Nadjarian, founder of Mojo Motors, a site that tracks used car prices.

“It can cross the line of privacy,” Nadjarian says, “and many people are willing to trade their privacy for money.”

Consumers want PAYD option

Even though PAYD is relatively new, with Progressive Insurance an early pioneer in the field in the mid-1990s, using the number of miles driven and a driver’s safety record to help calculate auto insurance premiums isn’t new, according to the Insurance Information Institute. Both are taken into account in traditional policies, with drivers generally asked by their insurer to estimate how many miles they drive in a year, according to an III post on telematics.

And while a driver’s safety record has always been a significant factor in the price of insurance, “unless the price goes up significantly after an accident or speeding ticket, drivers do not always link price to the way they drive,” according to the III. “Telematics technology provides immediate feedback about the riskiness or a driver’s behavior and therefore may be more successful in changing habits.”

The group points out that consumers often want their driving to be tracked with a telematic device, with a 2014 survey by the Deloitte Center for Financial Services finding that about half of respondents saying they would allow such monitoring without stipulating a minimum discount for granting permission. Others said they’d do so if discounts made monitoring worthwhile.

A September 2013 survey by Towers Watson found that nearly 90 percent of respondents were open to buying a usage-based policy if there was no risk of premiums increasing. Sixty percent of those were willing to change their driving habits, and 40 percent were concerned about insurers sharing the data.

The OnStar privacy statement for subscribers states that the company has “certain rights to use and share the information or materials you provide us.”

Years ago, GM raised privacy concerns when it wanted to the OnStar system to share the number of occupants, seat belt use and severity of an accident instantaneously with first responders such as ambulances, says Jason Vines, a former chief communications officer at Nissan, Ford and Chrysler, and now an independent communications and government affairs consultant who has written a book about the car industry.

The plan was quickly dropped after complaints from privacy advocates and plaintiffs’ attorneys.

Aaron Crowe is a journalist who covers the auto industry for CheapCarInsurance.net.