Should you let your car insurer monitor you?
You may be sacrificing your privacy
Michael Aminov-Tobin almost forgot a automobile insurance company was tracking his driving. He wasn’t paying extra attention to how briskly he drove or how hard he hit his brakes. So he was astonished when the corporate offered to insure his 2016 Hyundai Veloster Turbo HYMTF, +0.00% for $100 a month but he’d been paying.
“When it popped up with the worth that it did, i used to be like, ‘Holy crap, that’s awesome!’” says Aminov-Tobin, 25, who operates a video production firm from his home near Columbus, Ohio.
He benefited from a growing trend referred to as usage-based insurance, or UBI, during which auto insurance companies electronically monitor a customer’s driving and offer discounts in exchange.
Such programs are often an excellent deal for careful drivers and low-mileage users, but they also present significant privacy concerns, experts say. Before agreeing to be monitored, drivers should understand the risks and ask the proper questions.
“The data is so rich,” says Ting Zhu, an professor for Purdue University’s Krannert School of Management who studies UBI. “They know exactly where you go and once you go.”
The draw for drivers
Letting people prove they’re safe drivers makes auto insurance pricing more fair, advocates say.
Traditional automobile insurance rates are supported your driving record, plus demographic factors like age, location and legal status . While usage-based policies still consider these factors, they base a part of the speed on your driving behavior using telematics technology. Data are typically gathered via a plug-in device for your car’s diagnostic port or a smartphone app.
“Good drivers should pay less,” says Robert Hunter, director of insurance for the buyer Federation of America. “How you drive, and not who you're, should determine your rate.”
Discounts are often significant permanently drivers. With Nationwide’s SmartRide, discounts can reach 40%, says David Arango, senior vice chairman of private lines, which include auto and residential . At Root Insurance, the startup that insures Aminov-Tobin, the simplest drivers can cut their rates nearly in half, says CEO Alex Timm. At both companies, the executives say, typical savings are around 20%.
Low-mileage drivers can benefit, too. Evan Makovsky, 42, of Hoboken, New Jersey, estimates he saved $1,000 a year by switching to Metromile, which charges a monthly interest rate plus a per-mile rate. Makovsky drives his 2009 Volkswagen Passat VWAGY, -2.41% totally on weekends.
But rates aren’t always better with usage-based insurance. as an example , if you modify jobs and have a extended commute, a pay-per-mile policy could become costly. And with Progressive’s PGR, -0.01% trace program , which monitors how you drive, rates go up for about 20% of drivers, consistent with the insurer. Bad drivers won’t pay extra at Nationwide, Arango says, but they will lose their initial discount.
Data privacy concerns
Whether the worth break is well worth the privacy you relinquish by having your driving monitored depends on how you view the risks.
Aminov-Tobin wasn’t concerned: “If you would like the simplest rates, I assume you've got to sacrifice a touch,” he says.
But privacy expert Jen King fears drivers may sacrifice quite they realize.
“Where you go a day can tell people tons about what you’re curious about , where you reside , who you’re associating with,” says King, director of consumer privacy for the middle for Internet and Society at Stanford school of law .
Even if the knowledge isn’t sold, she says, it'd be utilized in ways the driving force didn’t anticipate.
A data breach is another danger, says Purdue’s Zhu. She points to the 2013 Target TGT, -1.04% breach during which cyberattackers stole the private information of many customers. Zhu says her research found that after the breach, drivers were more likely to drop usage-based auto insurance.
Nevertheless, UBI seems to be gaining traction. A J.D. Power study showed 10% of insurance customers used such programs in 2018, up from 8% the previous two years. Though the policies aren’t universally available, the National Association of Insurance Commissioners estimates 7 in 10 auto insurers will use monitoring technology by next year.
Ask before you purchase
Usage-based insurance policies vary. Some track braking, idling, and acceleration; others specialize in mileage. Some monitor driving for a limited time; others keep it up tracking. So it’s important to buy around and ask questions.
The CFA’s Hunter says to seek out out exactly what information the insurer will collect and whether it’s really associated with good driving. Also ask:
- How each little bit of data affects your rate.
- If you'll decline to share the knowledge without penalty.
- If the corporate will share or sell your data.
And remember that driving data makes up only a part of your insurance rate, says Janet Ruiz, director of strategic communication for the Insurance Information Institute.
“The most vital thing consumers can do about their auto insurance is have an honest , safe driving record,” she says.