An Insurance Policy That Monitors Your Driving – Are You Willing To Trade Your Privacy For Discounts?

No one likes an annoying back seat driver.  But could you stomach one that stayed quiet and just used observations of your driving habits to determine your auto insurance rates?  Well that time may be coming soon.   Insurance companies are beginning to build momentum in the field of using telemetrics as the primary actuarial data source for auto insurance rates.  Telemetrics, the science of measuring data created by your driving habits has the goal in mind of a more accurate auto insurance rate for each driver.

Insurance industry executives and underwriters have long wished for a better way to predict which clients will cause losses on their insurance policies.  In the world of auto insurance, the tools that insurance companies have had at their disposal in the past have been relatively crude.  Decisions about your driving ability and safety are currently based on information such as the kind of car you drive, your age and number of years driving, your past traffic violations and past auto insurance claims.  For instance, get a few speeding tickets and even though you’ve not filed a claim, in N.C., your auto insurance rates will skyrocket.  And yet I’ve seen quite a few clients with a high number of speeding tickets who never had an accident or filed an insurance claim.  Or take the example of teen drivers.  Not every new driver has accidents, but the insurance company simply has no way of knowing which child carries the greatest risk so they just have to charge huge inexperienced operator rates to all new drivers..  But what if the insurance company could watch young driver every time they head out in the car?  Would they then be able to make better decisions about which young driver is most likely to cause an accident and thus charge each a fairer rate?

Enter telemetrics, the newest underwriting science in auto insurance rates.  While this science has been around for a few years already, very few insurance companies have studied or adopted it.  That may be about to change.  State Farm Insurance, one of the largest auto insurers in the country is testing the use of telemetrics in several states and has indicated that they plan to roll this out to all states soon.  This strategy, should it succeed for State Farm, is bound to push this trend amongst all auto insurers much more quickly.  So what is telemetrics exactly?  Well, telemetrics is the gathering of data about your driving habits via small telemetric devices which plug into the car’s diagnostic ports.  This data is then sent to the insurance company and analyzed to determine if your driving habits indicate that you deserve  a discount refund on your rates for safer driving.  Right now these programs are focused on offering cash back discounts for good driving behaviors but are not designed to generate additional rate increases for the drivers who don’t make the grade.   That approach is almost certain to change should this form of auto rating, often referred to as usage rating become more common.    For now, this new technology is still in a testing phase and insurance companies would be hard pressed to get people to sign up to be monitored if they risked higher rates for doing so.

So what data are insurance companies collecting with telemetric programs?  Generally speaking they claim to monitor your speed, the number of miles your drive, the times of day that you drive, as well as your acceleration and deceleration habits and how hard you take turns.  What they currently claim not to monitor is seat belt usage, the exact vehicle location the car’s speed relative to the posted speed limit at that location. 

Telemetrics as a car insurance rating and underwriting tool is not without its critics.  The fears and complaints deal primarily with privacy issues in this data collection process.    Collecting this much data on U.S. drivers certainly puts insurance companies in a powerful position.  While they don’t currently plan to collect detailed data about where you have traveled, as telemetrics become more commonplace it can be assumed that more and more data will be collected.  This does create a slippery slope scenario where once you have given over your privacy to insurance companies, over time the data they collect on you could become more detailed and broader.  And once the data is compiled and collected, it could fall into the hands of law enforcement or even your separated spouse’s divorce lawyer or some other civil liability suit attorney.  And what about hackers gaining unauthorized access to insurance company data and using this information to harm you in some way?  And one other aspect of the slippery slope theory says that as more and more people accept the loss of privacy in order to try for more discounts, those who wish to maintain their privacy may have to pay higher insurance rates just to do so.  Would this be fair? 

Clinard Insurance Group is an independent insurance agency, located in Winston Salem, NC.  We insure thousands of families and businesses all across North Carolina, South Carolina, Tennessee and Georgia.  If you would like help with your auto insurance,  home insurance, life insurance or business insurance needs, please feel free to call us, toll free, at 877-687-7557.