There was a recent piece in the Wall Street Journal that discussed how insurance companies, like Progressive, are trying to get their customers to allow them to track their driving behaviors. The article discusses how companies are trying to figure out how to use location data (where the car is) that they gather in order to assess drivers. The companies get customers to install devices that track things like how far the customers drive and how often they hit their brakes. The companies are collecting personal data in order to draw some sort of conclusion about driving habits. Of course, the companies have to get consent from their customers to get this information.
Insurance companies like Progressive, Allstate, and State Farm are promoting a device you can plug into your car or smartphone apps to get the data. Their intention is to better identify safe drivers who are less likely to file insurance claims, and thus provide the customers with a discount. Their goal is to keep the “less risky” customers long-term, while riskier drivers face rate increases, and in turn could feel the need to shop around. According to the article, Progressive has about 25% of its new customers using its monitoring device.
The article goes on to discuss how insurance companies often establish rates based on socioeconomic factors, like credit histories, rather than driving habits. Apparently this is because they see financially responsible people as more cautious drivers. Now companies are trying to find a way to “craft truly individualized rates.”
Some interesting statistics presented in the article using data provided by Progressive and organized by demographic pools (the usual approach), shows that the average married male is 3% more likely to have an accident in a given year than a married female. However, married males with the fewest hard brakes are 41% less likely to have an accident than the typical married female as determined by the conventional methodology, according to Snapshot (monitoring device) data.
On another note, the article includes a chart of the cities with the most and least number of years between car collisions according to Allstate. Interestingly, Fort Collins, CO is in the top 5 cities with the least car collisions, with just under 13 years between incidents. Good job to the drivers in Fort Collins!
The article also notes that state insurance regulators generally have accepted “usage-based” insurance programs because they are voluntary and provide the opportunity for drivers to learn how to improve their driving. However, location tracking still raises huge concerns, and not just for the privacy implications or the fact that you are providing the company with information on your driving habits even before a claim has arisen. Some customers may be provided with increased rates not because of how they drive, but when and where they are driving.
We are all for decreased insurance rates with good driving habits that decrease the chances of getting in a car accidents. Therefore, tracking apps on the surface sound like a great idea to lower premiums. However, in the end there may be some risks. It’s ultimately up to you what you prefer. You always have the option to opt out of it, even after using.
For another piece on apps tracking drivers, check out apiece from the WSJ on apps tracking car sharing drivers.
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