Auto Insurance: Your Driving Data And Privacy

Many drivers are unaware that their auto insurance companies use their driving data, which is often collected by automakers and sold to third-party data brokers such as LexisNexis. This data includes information on driving behaviour, such as speed, braking, and acceleration, which can then be used to increase insurance rates. While some drivers knowingly opt into safe driving programs, others are unknowingly tracked through their connected cars' apps and services. This has raised concerns about data privacy, consumer rights, and the potential for data breaches, identity theft, and targeted scams.

Tracking driving behaviour

One prominent example of this practice is the case of General Motors (GM), which was revealed by the New York Times in March 2024. GM was found to be collecting detailed driving data through its OnStar Smart Driver program and selling it to data brokers like LexisNexis, who then sold it to insurance companies. This data included information on trip duration, fast acceleration, hard braking, speeding, and more. As a result of this data sharing, some drivers experienced unexpected increases in their insurance rates, with one case seeing a 21% spike in their insurance premium.

It is important to note that this practice is not limited to GM, as other automakers such as Subaru, Ford, Acura, Honda, Hyundai, Kia, and Mitsubishi have also been implicated in similar data-sharing schemes. These companies offer driver-scoring features that track and share data with insurance companies, often without the explicit consent of their customers.

The implications of this data tracking and sharing go beyond insurance rate hikes. There are also concerns about data breaches, identity theft, and targeted scams as a result of this secretive sharing of personal information. Additionally, there are questions about the effectiveness of using this data to determine driver safety, as it does not take into account the specific driving context, such as unexpected obstacles or the need for quick manoeuvres.

While some states, like Colorado, have laws that require notification of data tracking, many individuals are still unaware that their driving behaviour is being monitored and shared with insurance companies. This has led to a backlash from customers, with some considering lawsuits against automakers for the opaque nature of their data collection and sharing practices.

To protect their privacy, individuals can review the privacy terms of any connected car services they are enrolled in and request consumer disclosure reports from data brokers like LexisNexis to understand what data is being collected and shared.

Selling data to third-party brokers

Auto insurance companies have been known to purchase driving data from third-party brokers, such as LexisNexis, who in turn obtain this data from automakers. This data is then used to create risk scores for drivers, which can affect their insurance premiums.

Third-party brokers, such as data brokers, are companies that collect, group, and sell data on individuals, often without their consent. This data can include personal information such as driving habits, magazine subscriptions, and demographic data. It can be sold to various industries, including insurance companies, political groups, and marketing companies.

The sale of data to third-party brokers is often done without the knowledge or consent of the individuals involved. While some companies may include this practice in their privacy policies, many individuals do not read or understand these policies. This lack of transparency and consent violates individuals' privacy and can have negative consequences.

To comply with privacy laws and build trust with users, companies selling data to third-party brokers should ensure they have a thorough privacy policy that discloses this practice. They should also obtain explicit consent from users, provide opt-out options, and be transparent about the data being sold, how it is being used, and to whom it is being sold.

By following these best practices, companies can improve transparency, build trust with users, and reduce the risk of negative consequences associated with data selling.

Using data to increase insurance rates

It has recently come to light that automakers are sharing consumers' driving behaviour with insurance companies, which is then used to increase insurance rates. This practice has raised concerns about data privacy and consumer rights. While some drivers may knowingly opt into usage-based insurance programs, many are unaware that their data is being collected and shared without their explicit consent. This is particularly true for drivers of internet-connected vehicles, where it is becoming more common for drivers to unknowingly agree to share their data.

How Driving Data is Collected

There are two main ways in which driving data is collected: through physical telematics devices installed in vehicles, and via smartphone apps. Telematics devices are typically plugged into the vehicle's onboard diagnostic (OBD-II) port, which is commonly found beneath the steering wheel. These devices collect information such as speed, acceleration, braking patterns, mileage, and tire pressure. Smartphone apps, on the other hand, use sensors to gather data on driving behaviours such as sudden acceleration and hard braking.

How Insurance Rates are Increased

Insurance companies use the collected data to create risk profiles for drivers and adjust their premiums accordingly. Factors such as speeding, hard braking, sharp accelerations, distance driven, and driving between midnight and 4 am are considered when determining a driver's risk level. If a driver is deemed to be high-risk, their insurance rates may increase. Additionally, drivers with long commutes may also experience higher insurance costs as the number of miles driven can drive up insurance costs.

The Role of Data Brokers

In some cases, data brokers such as LexisNexis act as intermediaries between automakers and insurance companies. They collect driving data from automakers and create consumer risk profiles, which are then sold to insurance companies. This was the case for drivers of General Motors cars, such as the Chevrolet Bolt, who experienced unexpected increases in their insurance rates. Upon requesting their consumer disclosure reports, drivers discovered that their driving data had been shared with LexisNexis without their knowledge.

The Impact on Consumers

The use of driving data to increase insurance rates has significant implications for consumers. Firstly, it raises concerns about data privacy and consent. Many drivers are unaware that their data is being collected and shared, and even when consent is given, it is often buried in lengthy terms and conditions that individuals may not fully understand. Secondly, the metrics used to determine risk and adjust rates may not accurately reflect safe driving. For example, hard braking and acceleration may be necessary in certain situations, such as when a child or animal runs into the road. Finally, the increased use of data to set insurance rates may result in higher costs for drivers, particularly those who are deemed high-risk or have long commutes.

Opting in to data collection

Some insurance companies, such as Progressive, offer similar programs where drivers can opt-in to have their driving habits monitored in exchange for potential discounts. Tesla also offers its own insurance option, where customers must opt into having their driving behaviour tracked. These programs are often referred to as usage-based insurance, and they can provide benefits to drivers who consistently demonstrate safe driving habits.

It is important to note that while these programs can offer potential savings, there are also privacy concerns associated with them. Drivers may not always be fully aware of the extent of the data collection and how it is being used. Additionally, there may be a lack of transparency regarding the sharing of data with third-party brokers or other companies. As a result, it is crucial for drivers to carefully review the privacy policies and terms of service before opting into any data collection program.

Furthermore, the metrics used to determine driving scores may not always accurately reflect safe driving habits. For example, hard braking and acceleration are often treated as negative factors, but there are situations where these actions are necessary for safety, such as when a child or animal runs into the road. Therefore, it is important for drivers to understand how their driving data is being evaluated and how it may impact their insurance rates.

Privacy concerns

Privacy is a major concern when it comes to how auto insurance companies use driving data. While usage-based insurance (UBI) can offer drivers significant discounts, it also raises questions about data privacy and consumer rights. Drivers may not be aware that their data is being collected and shared with insurance companies, and even if they are aware, they may not have explicitly consented to it. This lack of transparency and potential breach of privacy can have serious consequences, including insurance rate increases, data breaches, identity theft, and targeted scams.

In recent years, it has been revealed that carmakers such as General Motors (GM) have been sharing customers' driving behavior data with data-collection companies like LexisNexis, which then sell this information to auto insurance companies. This data includes detailed information on every trip taken, including dates, start and end times, distances driven, and instances of speeding, hard braking, or rapid acceleration. This information is then used by insurance companies to adjust rates, often resulting in unexpected increases for customers.

The issue of privacy is not limited to data collection by carmakers. Insurance companies themselves are also moving towards tracking customers through mobile apps on smartphones. While customers may opt into these programs to save on insurance rates, privacy experts warn that these apps may have access to sensitive information such as call logs, text messages, and location data. Furthermore, insurance companies may share this data with third parties, including law enforcement, potentially compromising customers' privacy rights.

Another concern is the accuracy and fairness of the data being collected. The metrics used to evaluate driving behavior, such as hard braking or late-night driving, may not always reflect the actual driving situation and can be misleading in determining a driver's safety. For example, hard braking may be necessary to avoid an unexpected obstacle, and late-night driving may be due to work requirements rather than reckless behaviour.

Lastly, there are concerns about how driving data could be used beyond insurance purposes. With data breaches and identity theft on the rise, personal information in the wrong hands can lead to serious consequences. This includes not only financial losses but also potential threats to an individual's safety and well-being.

Overall, while the use of driving data by auto insurance companies can have benefits in terms of encouraging safe driving and offering discounts, it also raises serious privacy concerns that need to be addressed to protect consumers' rights and ensure the responsible handling of sensitive information.

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