Millions of Americans have found a way to lower their auto insurance premiums – by as much as 30 or 40 percent – without reducing their coverage. They’ve agreed to allow their insurance company to monitor how, when, and where they drive.
But consumer advocates caution that there aren’t many regulations to control what data insurers can collect or what they can do with that information.
Insurance companies normally use a variety of demographic factors, such as age and gender to set their rates. Now, nine of the 10 largest insurers in the U.S. offer “telematics programs,” also called usage-based insurance that measures driver behavior. They’re marketed as a way to better align premiums with a driver’s specific risk, and reward those who drive less and who drive safely.
For some drivers, data can be uploaded directly from connected vehicles; for others, monitoring is done via smartphone apps.
“The companies all claim…[they] are not going to take your data and sell it, but I don’t really trust them and frankly, neither should you,” said Michael DeLong, an auto insurance expert with the Consumer Federation of America, and author of the report, Watch Where You’re Going.
Checkbook visited insurance company websites and found that many list vague descriptions of what they track, such as hard braking, fast cornering, and distracted driving,
But what does hard braking mean? What constitutes distracted driving? And how much weight does each factor, such as mileage or time of day carry when computing a driving score?
“Whenever we’ve tried to get more transparency about the factors that go into telematics programs and how much each factor matters, like on a percentage basis, the companies have pushed back and said that would hurt competition and it would ruin everything, and we don’t want to do that,” DeLong told Checkbook.
Consumer advocates worry that insurance companies are collecting more information than they need to run these telematics programs. A Consumer Reports investigation found that most insurers generally require 24/7 access to your smartphone’s location.
“Most of the companies haven’t admitted to tracking people’s locations, but we think they probably have that data and store with it and that there need to be protections against it’s being used,” CFA’s DeLong said.
The insurance industry acknowledges that the use of telematics programs has raised privacy concerns. Even so, they told checkbook usage-based insurance is “gaining popularity.” And they say their research shows that drivers who’ve signed up for usage-based insurance say they’ve made significant safety-related changes in the way they drive.
NOTE: While the ads talk about saving 30 or 40 percent, some insurance companies will raise your rates at renewal time if their algorithms determine you’re a higher-risk driver.
More Info: Should You Give Up Your Privacy to Save on Auto Insurance?
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Herb Weisbaum, The ConsumerMan, is a contributing editor at Checkbook.org, a nonprofit organization with a mission to help consumers get good service and low prices. It does this by providing unbiased ratings, advice, and price information. Checkbook is supported by consumers and takes no money from the service providers it evaluates.
