Like many technologies, GPS started as a military applicationa ring of satellites that allow users of the devices to triangulate their position to within a few feet. Battlefield commanders, naval units, and the Air Force found them invaluable. So, too, did outdoorsy types, who used the devices to find their way out of the woods, or, more often, to record their favorite hunting, fishing, or camping sites.

At one time, the government introduced a small amount of error into the system, giving civilian users accuracy only to within about 100 feet. But on May 1, 2000, that restriction was lifted. Today, you can expect accuracy to within about 20 feet with a standard receiver; supplementary technologies such as ground-based DGPS and the upcoming WAAS (Wide Area Augmentation System) increase the accuracy to within a few feet.

With the addition of mapping software, GPS units found their way into vehicles. Drivers could program their destination and be giving just-in-time directions as they drove. By adding radio or cell-phone connections, trucking firms could track their fleets and parents could track their kids.

The advantage of being able to track someone or somethings movements to within a few feet didnt escape the insurance industry. It was just a matter of making the leap from recognizing that a technology could be useful to figuring out how it could be used.

Down on the Farm

Firemans Fund AgriBusiness (FFAB) has been evolving its use of GPS since 1996, according to Dave Schuler, the insurers director of marketing and sales. We had two things we wanted to do: differentiate ourselves from the competition and simplify the crop insurance process, he explained.

Fields on a farm are rarely rectangular, and measuring them can be a chore. So FFAB found a way to both measure and map fields that gives landowners an accurate view of their property. Farmers tend to think of the geography of the land, Schuler said. With our mapping services we give them an actual picture of their field.

The service is simple. An FFAB agent brings a small ATV to the clients farm. Attached to the ATV is a Windows Pocket PC with a Trimble GPS. The agent then drives around the perimeter of the farms fields, recording all the measurements. Its almost like an Etch-a-Sketch, Schuler said. It paints a picture of your property. If there are untillable portions of the field inside the perimeter, the agent records those as well. The agent goes into the field and sees the discrepancies, he said. The agent can then tailor the insurance product for what the grower needs.

If the agent is also equipped with a wireless modem, the data can be sent from the field to the FFAB Web site. By the time he gets back to the farmers house, they can download the map onto the farmers PC, Schuler said.

The physical measurements give the farmer an accurate number of acres being farmed. Farmers pay their premiums based on the acreage, and Schuler said that typically farmers have overestimated the size of their fields. Thanks to estimation errors and untillable areas, They quite often have fewer acres than they thought, he said. That means a smaller premium.

Etch-a-Sketch is fine for the basic property and field lines, but theres more. Topographic (or simply topo) maps from the U.S. Geological Survey (www.usgs.gov) offer a true picture of the property, indicating the terrain and the location of ground features such as mountains and roads. By combining topo maps and aerial photos (the USGS has aerial imagery for the entire country), its easy to get an extremely accurate view of the property including direct measurements of distances, areas, angles, and positions. When you overlay weather information like hail tracks, drought areas, and areas affected by wind or freezing conditions, you get a clearer picture of some of the risks faced by the property.

Schuler said there are 18 insurance carriers offering crop coverage in the U.S., with the top five selling about 90 percent of the coverage. (FFAB is currently No. 4 in the market.) The mapping doesnt get credit for it all, but AgriBusiness premiums grew 21 percent from 2000 to 2001, he said.

Driving Down Rates

Progressive began an intriguing use of GPS in Texas four years ago: A program it called Autograph was designed to determine how feasible it was to calculate auto insurance rates based on usageboth from a technology and a consumer perspective. Some of Progressives customers had their cars equipped with GPS systems to track their mileage; they were then billed accordingly. Besides saving money for infrequent drivers, it could help the folks in underwriting by eliminating fraudulent claims (you know, saying that a round trip to the office is 17 miles when its really 34).

Progressive spokesman Matthew Collister said the system was a hitthe technology worked and the users approved, especially those who didnt drive much. Even the National Organization of Women gave it the thumbs up (studies show women drive fewer miles than men).

Progressive ended the test last summer. There was plenty of upside to the program, but there was an obvious downside as well: Most cars dont have GPS systems. A statement released by the Ohio-based insurer said, Unfortunately, the company is simply ahead of its time with the concept. In the late 90s, Progressive understood how this technology could benefit consumers, figured out how to get it installed in cars, and have since proven that it can work. The company hoped that vehicle [manufacturers] would notice this use of technology and quickly design it into vehicles.

They are still waiting, but it may not be for long. GPS is already standard on some luxury cars such as the Cadillac DeVille and Seville models, but auto industry estimates say it will be another two to three years before it becomes standard on less expensive models. And that doesnt factor in the millions of used vehicles that will be on the road for the next decade, but its a start.

Collister said that Progressive has no plans to reintroduce usage-based auto insurance anytime soon, but the company is committed to the idea because it gives consumers control over their insurance costs. He said Progressive will continue to work with auto manufacturers and telematics experts to determine a more cost-effective way of offering GPS to consumers.

Jamie Bisker, director of research for insurance practices with the Tower Group, believes the program will return once cars are equipped with GPS systems. But dont hold your breathhe also believes it will be three to five years before the cost of a built-in GPS receiver drops to the point that car buyers wont see it as a luxury (the way they once did with power windows and sun roofs). Its relatively expensive now, but when the price gets down to about $500, which is the figure I heard it will eventually fall [to], it will become very popular, Bisker said. Handheld receivers can be had for $200 or less, but they dont come with the large screens and detailed street maps needed for an in-vehicle system.

Bisker believes the Progressive test was a success, but, with no commercial product available to be loaded into carsat least not at a price consumers feel is affordablethe insurer had no choice but to end the test and put any plans for deployment on hold.

Some of Them Want to Use It

Even when the price of hardware drops, will American consumers embrace GPS systems the way they have power doors and cell phones? Bisker thinks so, in part because of the concepts popularity in Europe. Driving a car on the Continent is more expensive than in the U.S., and finding a way to cut some of those costs is heartily endorsed by European consumers.

Usage-based underwriting is one concept most consumers will love, Bisker saidexcept for those who take advantage of the current system. In addition to mileage, it can factor in things like where a person drives, the time of day he drives the most, and (with echoes of Big Brother) how fast he drives. All this will better allow carriers to tailor policies and rates to individuals, rather than to broad classes. This is good news for infrequent drivers with short commutes, but those who pile on the miles might see it differently. Bisker doesnt think that type of driver will appreciate usage-based underwriting, but he doesnt offer much sympathy. If you represent a higher risk, insurers have every right to charge you more money, he said.

Operators of commercial fleets are already using GPS systems to track their vehicles and the miles they travel. That translates to lower insurance rates for vehicles that arent on the road, not to mention the ability to track the progress of deliveries. And hijackers had better know how to disconnect the GPS antenna or theyll lead the police right to their garage.

The only thing holding back usage-based underwriting is the cost and as has been demonstrated time and again, a little patience will mean great savings as the calendar pages turn. OnStar, the system available in Cadillacs and other GM cars, already has a transmitting hookup, perfect for real time underwriting. It may take a while before it becomes standard in the Cavalier, but when it does, Bisker believes underwriting automobile insurance will see a radical change.

GPS systems will also have some other, less dramatic uses in the insurance industry. Claims reps looking for an insured building after a major storm may not have street signs to guide them; GPS can bring them right to the buildingor whats left of it. And as the technology is developed to make receivers and transmitters smaller, look for GPS equipment on expensive items like stereos and televisions, much like the LoJack system in cars. By tagging items that way, trucking firms and even consumers might be able to reduce their costs, and insurers their losses.

There will probably be other uses for GPS systemsones no one has considered yet. Some will fail, of course, and some will catch on. And some, like Firemans Funds and Progressives, will allow insurance companies to serve their customers (and their bottom lines) a little better.