Gabriel Botelho • 2023-01-02
How much is your privacy worth? In Car Insurance Premiums. Telematics is car/auto insurance that monitors a person's driving habits. Monitoring includes how far, how fast, and how often they brake or accelerate when they drive. It's supposed to lower insurance premiums for some drivers based on their specific behaviors.
If you care about your privacy while in your car you might not want to sign up for telematics. If you’re a good driver, based on the criteria that feed into most pricing models, and believe you can keep that track record then telematics might be able to offer some discounts.
There are obvious privacy and discrimination concerns. To monitor a person's driving habits, insurers often install a device that tracks the vehicle's movements and sends the data to an analytics company or back to the insurer. The telemetry sent includes your location and driving history, enabling your habits and behavioral profile to be traced. The truth is that it still leaks less data than your phone.
Some comparative experiences from Reddit: telematics users in the UK, often harbingers for the tech and regulatory futures of Americans, report challenges to getting into the discount brackets that made the lower premiums available in the first place. A dutch/german worries about the privacy implications of their telematics system and how the presence of an analytics company storing his data affects him. In addition to complaining about the difficulty of achieving the highest scores on the telematics discount machine CalebWhiskey a user in the /r/insurance subreddit who claims to work in insurance pricing, offers this useful summary:
"As with everything in insurance pricing, it varies from company to company. Generally speaking, everyone offers an up-front participation discount to encourage use. From there, companies either only discount farther so that “good” drivers get an even bigger discount and “bad” drivers don’t lose their participation OR “good” drivers get an even bigger discount and “bad” drivers get surcharged higher than they would have before. Once a company knows your score, it depends on the state and company- if you choose to leave the telematics program, you could either go back to the non-telematics price like nothing happened OR the company might freeze your telematics score at that higher rate and you are stuck with the surcharge and no way to get out."
It's clear from this casual survey that users deserve more transparency in how insurers use telematics. Their recent legalization in California has been the conclusion of a long a drawn out, and insurance-related fight. Previously only CA banned telematics of the five states (NY, TX, WA, FL are the others) Coverage Cat operates in. The change prompted the NGO Consumer Watchdog to raise concerns about automotive telematics and raise concerns about discriminatory pricing in homeowners insurance.
While telematics insurance has the potential to offer lower premiums to some drivers, consumers deserve more transparency in data collection and pricing practices. Significant telematics discounts also need to be examined to ensure they deliver as much consumer benefit as promised and don't discriminate against driver groups.