The use of personalized driving data is a growing trend among auto insurance companies, according to a recent Wall Street Journal article titled, “Car Insurers Find Tracking Devices Are a Tough Sell.”
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Insurers are gathering and analyzing insured-generated usage data to better analyze potential risks among drivers, in addition to relying on the traditional demographic information. The conventional data of a driver’s age, car type, and gender only allowed auto insurance companies to group consumers into broad risk pools.
This personalized driving information, including the number of times drivers slam on their brakes, distance traveled, and the time of day drivers are using their cars, allows leading insurers like Progressive, Allstate and State Farm, to identify safe drivers and offer them discounts.
This so-called usage-based pricing data enables insurers to levy surcharges in some states, based on insureds’ driving habits.
Insurance defense lawyers may want to step behind the drivers wheel and take a test drive of usage-based driving data on their own personal auto policy. What better way to get a behind-the-scenes look at how these new apps work from the perspective of both the insured and the insurer?
Changes in the manner in which this information is gathered, fueled by increasingly user-savvy technology, has helped insurance companies lure more of their insureds to allow their data to be gathered and tracked.
In order for the insurance companies to gather this usage-based information, they need driver consent. This consent has become easier to obtain as technology, especially the rise of wireless technology and cell phones, has made Americans more accepting of location tracking. Nevertheless, many consumers resist the idea of voluntarily granting access to real-time data collection on driving patterns.
Progressive’s Snapshot program, which monitors participants’ driving for six months via a wireless device installed in their car, has had almost four million participants since 2008. When the driver slams on their brakes, for example, the device beeps to alert the driver and also records the incident. For example, with this personalized data, Progressive has identified that the best indicator of accidents is “hard braking,” a term they define as decreasing speed seven miles an hour or more in a second.
This trend of gathering individualized driver information has just begun. A smartphone app of Progressives’ Snapshot device is set to debut in 2016. Allstate was issued a patent in 2015 for sensors and cameras monitoring sources of driver distraction inside the car, such as Fido barking in the backseat and phone usage. With the rise of smartphone apps, smaller insurance companies are now able to take advantage of a lower barrier to entry and are beginning to hop onto the usage-based program bandwagon.
Progressive’s usage-based data is encrypted and sent to large servers housed in Progressive’s “bunker” – a building in the company’s Ohio headquarters. The “bunker” currently has information gathered on 15 billion miles of driving, and captures information on up to one million trips a day.
Progressive cannot use this information to resolve a claim unless the insured’s consent is given, as required in accordance with their privacy policy.
State insurance regulators have generally accepted usage-based tracking programs, based on the required driver consent. Regulators reason that drivers can learn of, and then improve upon, their driving habits.
Click on the link to read the article, “Car Insurers Find Tracking Devices Are a Tough Sell.”
