Paul Sanchez
Insurance companies use various methods to track and collect data on their customers' driving habits. This includes the use of mobile apps, which can monitor speed, acceleration, braking patterns, location, and movement. This data is then used to create a driving score that reflects a driver's habits and can be used to adjust insurance premiums. In addition to apps, insurance companies also use special equipment installed in the vehicle, known as insurance trackers or telematics devices, to gather information. These trackers collect data from the car's computer, such as speed and location, to assess driving habits and identify safe drivers for discounts. While these tracking programs offer benefits like discounts and feedback, they also raise privacy concerns as they provide insurance companies access to personal information.
| Characteristics | Values |
|---|---|
| How do insurance apps know who is driving? | Insurance apps use various sensors and data sources within your smartphone to collect information about your driving behavior. |
| What data do they collect? | Data about when, where, and how you drive are broadly referred to as telematics. This includes speed, acceleration, braking patterns, time of day, and distance traveled. |
| How do they collect the data? | The Global Positioning System (GPS) in your smartphone plays a crucial role in tracking your location and movement. Telematics, a combination of telecommunications and informatics, helps analyze this data. |
| Do users have privacy concerns? | Many apps address privacy concerns by allowing users to opt in or opt out of data collection or by ensuring they use the data solely for rate calculations and do not share or sell it to third parties. |
| What are the benefits for users? | Safe and responsible drivers can benefit from significant savings on insurance premiums. Some apps offer real-time feedback on driving habits, and insurance companies may offer discounts for agreeing to use their tracking device. |
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What You'll Learn
Telematics and statistical organisations
Telematics is a technological innovation that has emerged as a solution to the problem of rising auto insurance premiums. Telematics refers to the integration of telecommunications and monitoring systems to gather and transmit data. This data, known as telematics data, includes information on when, where, and how an individual drives. This can include driving habits, mileage, weather, road conditions, and even when a person drives.
Telematics has had a significant impact on the auto insurance industry, allowing for a shift from traditional risk assessment models to more personalised insurance premiums. Traditionally, insurers relied on demographic data, historical accident statistics, and vehicle types to determine rates. With telematics, insurers can collect real-time data on individual driving behaviours and apply the data to auto policies. By analysing data, such as how often a driver brakes suddenly or their average speed, insurers can gain a more accurate understanding of risk. This allows for a more tailored approach to pricing, where safe drivers are rewarded with lower premiums, and those with riskier driving habits may see higher rates. This shift towards usage-based insurance (UBI) makes auto insurance more reflective of actual driving behaviour.
Telematics data is collected by insurance companies and statistical organisations. In North Carolina, for example, Arity is one of seven statistical organisations approved by the state Department of Insurance to use telematics. The others are Cambridge Mobile Telematics, ISO, LexisNexis Risk Solutions, Octo Analytics, On the Money Analytics, and Root Enterprise Telematics. This data is aggregated anonymously to analyse things like traffic. However, for it to be used to influence insurance rates, explicit permission must be given by the user.
Telematics not only helps in setting premiums but also plays a crucial role in risk management and claims handling. Insurers can use telematics data to offer feedback and training to drivers, helping them improve their driving habits and reduce accidents and claims over time. In the event of an accident, telematics data can provide valuable insights into the circumstances, leading to faster claims processing, more accurate settlements, reduced fraud, and efficient claim handling.
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Tracking driving habits
While some insurance companies offer discounts for customers who agree to use these tracking methods, privacy concerns have been raised as these companies gain access to personal location and driving habit data. To address these concerns, some apps allow users to opt in or out of data collection and ensure that the data is used solely for rate calculations and not shared or sold to third parties.
The data collected by insurance companies can be used to identify safe drivers and offer them discounted rates. Safe driving habits include adhering to speed limits, safe acceleration and braking patterns, and avoiding driving at riskier times, such as late at night when visibility is lower and the chances of encountering impaired or fatigued drivers are higher.
In addition to insurance companies, certain statistical organisations also collect driving data through smartphone applications. For example, Arity, a statistical organisation approved by the North Carolina Department of Insurance, receives data from apps such as GasBuddy, Life360, and MyRadar. This data is used to help insurers price drivers more accurately and influence insurance rates, provided the customer has given explicit permission.
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Permission and privacy
The use of insurance apps that track driving behaviour raises several privacy concerns. Firstly, allowing insurance companies to collect data on driving behaviour means surrendering private information about an individual's life, such as their location on a specific date and time and whether they regularly speed. This data may be collected even when the individual is not driving. Secondly, there is a risk that this data could be used against the policyholder. For example, an insurance company could use the data to deny or reduce compensation for a claim following a car accident.
In addition, there are concerns about what other information these apps have access to on consumers' phones. For example, Khaliah Barnes of the Electronic Privacy Information Center has questioned whether these apps can access call information or text messages, including whether the policyholder is texting and driving.
Some insurance companies have addressed these concerns by stating that they will not sell personal information. For example, Allstate, Liberty Mutual, Progressive, and State Farm have all stated that they will not sell personal information. However, it is important to note that some of these companies do state in the fine print of their terms and conditions that data may be shared with third parties. For example, State Farm's terms and conditions state that information may be shared with "third-party service providers", while Allstate's terms and conditions say that "data may be disclosed to third parties".
It is worth noting that, in some states, explicit permission is required from the policyholder for insurance companies to use telematics data to influence insurance rates. In North Carolina, for example, Arity is one of seven statistical organisations approved by the state Department of Insurance to use telematics. However, a spokesperson for the NCDOI has stated that "we do not allow insurance companies to surcharge NC drivers based on telematics programs".
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Driving scores
Over the last two decades, insurance companies have been trying to get people to enrol in programs that monitor their day-to-day driving so that rates better reflect the actual risk. However, privacy-minded consumers have been reluctant to sign up. As a result, insurance companies have turned to smartphone apps that ride along with users wherever they go. These apps collect, store, and transmit data without ever telling the user, and insurance companies use this data to set rates and create driver scores.
Smartphone apps can record not just where you drive but how fast you drive, how hard you brake or accelerate, and how much you use your phone while driving. This data is referred to as telematics or driving behaviour analysis. Insurance companies have advertised for years that customers can submit to telematics tracking to get discounted rates on their car insurance. However, what's different today is that lesser-known statistical organizations are also collecting details about driving habits through smartphones, and drivers may never realize it's happening.
In North Carolina, Arity is one of seven statistical organizations approved by the state Department of Insurance to use telematics. The others are Cambridge Mobile Telematics, ISO, LexisNexis Risk Solutions, Octo Analytics, On the Money Analytics, and Root Enterprise Telematics. Arity is capable of collecting data from apps like GasBuddy, Life360, and MyRadar. It then sells driver scores to insurance companies via Allstate’s website.
It's important to note that, in order for telematics data to be used to influence insurance rates, drivers must give their insurer explicit permission. Many insurers offer telematics discount programs, so it's important to read the details of these programs to know all the sources they are pulling driving data from.
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Insurance trackers
Smartphone applications utilise the device's sensors and data sources, such as GPS and telematics, to track location, movement, and driving routes accurately. This data is then analysed to determine driving habits and create a driving score that reflects overall driving behaviour. Some apps provide real-time feedback to users, allowing them to improve their driving and potentially lower their insurance premiums.
Dedicated insurance tracking devices installed in vehicles gather information directly from the car's computer. These devices can read various data points, including speed, acceleration, and braking patterns. Insurance companies use this information to identify safe drivers and offer them discounts on their insurance premiums. The use of these trackers can raise privacy concerns as they provide insurance companies access to personal location and driving habit data.
It is important to note that the use of insurance trackers is usually optional, and users can choose to opt in or out of data collection. Additionally, insurance companies often provide discounts or incentives to customers who agree to use these tracking devices or applications. The collected data helps insurance providers more accurately calculate insurance rates and identify safe drivers, resulting in potential savings for responsible drivers.
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Frequently asked questions
Insurance apps use various sensors and data sources within your smartphone to collect information about your driving behaviour. This includes the Global Positioning System (GPS) in your smartphone, which plays a crucial role in tracking your location and movement.
Insurance apps collect data about when, where, and how you drive, including your speed, acceleration, braking patterns, and the time of day and distance you travel. This data is referred to as "telematics".
Insurance companies use the data collected by insurance apps to assess and manage risk, and to calculate insurance premiums. Safe and responsible drivers can benefit from significant savings on their insurance premiums, while risky driving behaviour may result in increased premiums.
Yes, many insurance apps allow users to opt in or opt out of data collection. You can also choose to use an insurance tracking device installed in your vehicle instead of an app. It's important to do your research and ask the insurance company about their specific policies regarding data collection and tracking devices.
