The Emerging Privacy Invasion from the Insurance Industry

By Jacob W. Gent, Attorney at Law

The auto insurance industry have begun implementing programs to provide more personalized quotes based on the actual driving habits of consumers through the use of auto tracking devices.  And some insurance companies are offering consumers financial incentives in the form of discounts, as much as 30% off premiums, to entice customers to install these tracking devices on their vehicles.[1]  Before deciding to enroll in such a monitoring program, one should stop and consider the motivation and risk behind these offers.

The birth of tracking devices is the offspring of “telematics,” the merger of telecommunications and infomatics, enabling the insurance industry to move closer to a “Pay How You Drive” business model that can calculate premiums based the driving habits of the policyholder.[2]  These devices are installed in your car and records information such as vehicle speed, acceleration and braking rates, cornering, miles driven, vehicle location and route driven, time of day the vehicle is driven, and other vehicle operational information such as fuel consumption.[3]  Telematic systems may be linked through your smart phone, connected to a vehicle’s infotainment system, or plugged in to the On-Board Diagnostics (OBD) port.

While the allure of cheaper rates for car insurance is appealing, make no mistake: insurance companies are out to earn profits, huge profits.  No matter how neighborly, caring, or friendly their advertising scheme may be, auto insurers will be able to search the data collected through telematics to show you are a “risky driver” in order to raise your rates.  And with telematic tracking devices voluntarily installed in a customer’s vehicle, the easier it is for insurers to charge higher premiums.[4]

The criteria you must satisfy to receive any premium discount is determined exclusively by the insurance company and subject to change at any time.  Moreover, insurance companies do not guarantee any discount when you enroll in these monitoring programs.  According to Progressive’s Snapshot Common Questions FAQ:

“Most Snapshot customers earn a discount based on their safe driving; however, riskier driving based on [driving habits that] indicate a greater likelihood of being in an accident and may result in a higher rate at renewal.”[5]

This means that your premiums will be set based on a projection of a collision, not on data of an actual collision.  Progressive was the first auto insurer in the United States to start using a telematics tracking system.  Beginning in 1998, Progressive rolled-out the “Snapshot” program Copy of March 2017 Advocate Article to incentivize good driving habits by offering discounts to safe drivers.[6]  Initially, the data collected by Progressive was only used to determine whether a policyholder qualified for the advertised discounts.  But starting in 2013, Progressive began using telematics data to adjust and increase rates based on driving behavior.[7]

Progressive claims 80% of its policyholders would benefit from the Snapshot program, but interestingly only about 25% of their customers participate in the program.  Similarly, Allstate reported to the Wall Street Journal that approximately 30% of its customers participated in its Drivewise program.[8]  Apparently, not all drivers are eager to give insurance companies access to more of their personal information, such as where they drive and when.

The reluctance of many consumers to sign on to these insurance industry programs has something to do with well-founded privacy concerns.  Advertisers, and the data brokers who sell information to them, track consumers’ virtual footprints online while banks and credit card companies track when and where customers shop, and retailers monitor and market to consumer buying patterns.[9]  Monitoring when and where a person drives can feel especially intrusive to the American consumer, where the idea of the “open road” is synonymous with our general notion of freedom.

Even more concerning is the question of who else might gain access to this information.   According to Jeff Wright, Vice President of Usage Based Insurance at Liberty Mutual:

“Liberty Mutual values and respects our customers’ privacy.  We will not share personally identifiable usage data we collection with any third party except to service our customers’ auto policies, for research, or as required by law.”[10]

The assurance of protecting privacy in the first part of the sentence is voided by the phrase “except to service our customers’ auto policies, for research, or as required by law.”  That latter statement is vague enough to allow insurers to do what they want with the data.  For example, the phrase “required by law” means your personal data could be subject to subpoena by a court or provided to law enforcement agencies to comply with state or Federal laws, which may have nothing to do with an individual’s driving habits.[11]

Many theorize that it is only a matter of time before insurance companies require telematics devices be used on every vehicle before issuing a policy and that certainly appears to be the trend within the automobile manufacturing industry.  According to a white paper by IHS Technology published in 2011, it is predicted that “by the end of 2018, the percentage of new cars available for sale in the U.S. Market with embedded telematics will soar to 80 percent.”  A 2013 report by ABI Research stated “global insurance telematics subscriptions [are predicted] to grow at a compound annual rate of 81 percent from 5.5 million at the end of 2013 to 107 million in 2018.”[12]  Once the use of these tracking devices becomes mandatory, insurance companies’ profits will soar as they constantly monitor their customers’ behavior.  Until that time, be sure to read the fine print before voluntarily agreeing to participate in any insurance monitoring program to decide whether the possible savings is worth the privacy you are giving away.

Next time you think, “Why not? It may save me a few bucks…,” stop and consider the motivation and risk behind the offer.  The attorneys at Adler Giersch are as committed to advocacy for our clients as we are on staying abreast of developments in the insurance, legal, and medical worlds that impact all of us.


[1] Consumerist; https://consumerist.com/2016/01/11/some-drivers-dont-want-insurance-companies-tracking-them-even-if-it-means-discounts/

[2] Digital Trends; https://www.digitaltrends.com/cars/how-telematics-may-affect-your-auto-insurance-rates/

[3] Allstate.com; https://www.allstate.com/tools-and-resources/car-insurance/telematics-device.aspx

[4] Digital Trends.

[5] Progressive.com; https://www.progressive.com/auto/snapshot-common-questions/

[6] US News & World Report; https://cars.usnews.com/cars-trucks/best-cars-blog/2016/10/how-do-those-car-insurance-tracking-devices-work

[7] Id.

[8] Consumerist.

[9]  Id.

[10] Digital Trends.

[11] Id.

[12] Digital Trends.