The Big Data Behind Bad Driving—and How Insurers Use It
Benefits and Concerns About Usage-Based Insurance
Let’s say an insurance company offers you the opportunity to lower your premium by using a tracking device or app while you’re driving. By having your car’s speed, brake rhythm, turn tightness, and other driving factors monitored, you can prove to an insurance company that you are a safe, low-risk driver and thereby earn a cheaper premium. The financial incentive to drive safe seems harmless and convenient, but how else can insurers use this data?
Also known as “usage-based insurance,” several companies have implemented programs that offer discounts to encourage safer driving. For example, Progressive uses Snapshot, Liberty Mutual uses RightTrack, Allstate uses Drivewise, and State Farm uses Steer Clear. Many insurers and policyholders see encouraging results from these programs: they reinforce positive driving behaviors, may offer discounts simply for signing up, and allow drivers to gain premium discounts.
The reality, however, is that while insurance companies are concerned about drivers’ safety, they are still a business looking out for their bottom line. The question then arises: Will insurers treat user-based big data as an incentive for safe drivers, or will they use it negatively, to spike premiums or slyly predict or assign fault in accidents, for example?
Big Data Basics
One of the first usage-based insurance (UBI) programs to hit the market was Progressive’s partnership with General Motors roughly a decade ago. The program implemented a mileage-based discount to users by using GPS technology. Many UBI programs still use this technology, but there have been many advancements.
Insurers can now know how, where, and when policyholders drive. UBI variations include “pay as you drive” (PAYD), “pay how you drive” (PHYD), and other distance- and telematics-based insurance options. The term “telematics” refers to the merging of telecommunications and information science for accurate data assessment. The benefits of telematics-based UBI programs include the ability to increase accident response time and track lost or stolen vehicles.
Additionally, a popular method of analyzing UBI is through plug-in devices. These devices, which connect via the OBD-II port of a car, don’t necessarily track location, but they do report more accurate and detailed information about vehicle usage. While telematics and GPS are the most common ways to track driving behaviors, future innovations will likely include using a car or phone’s GPS and accelerometer to monitor abrupt alterations in speed and other unsafe behavior.
In December 2015, Liberty Mutual tested volunteer drivers with this technology in order to expand their RightTrack program, and State Farm is testing their own voluntary phone tracking platform. According to SMA Research, it is expected that nearly 70% of all auto insurance carriers will use telematics-based UBI by 2020. UBI methods are on the rise and will continue to grow in accuracy and accessibility.
What Insurers Say
UBI and behavioral monitoring are undoubtedly desirable for insurers. Big data provides insurance companies a “fingerprint” for each driver, which allows them to tailor their price points and policies to individuals’ behavior. Companies have the option to create individualized insurance plans by understanding how much coverage a specific driver requires. With such comprehensive information, it helps insurers understand their entire risk pool, and it transfers some of the power to the driver. Jeff Wright, a vice president at Liberty Mutual, says, “Usage-based insurance is a very exciting way to offer real benefits to our customers. Customers can take a bit more control over what they’re charged in their insurance premiums.”
While most insurance companies say UBI and monitoring will likely lead to discounts, some are more transparent about the possibility of an individual’s policy rising in price if the data collected signifies high-risk driving. Progressive, for example, answers a common question on their website by saying:
“Most Snapshot customers do earn a discount based on their safe driving; however, riskier driving habits based on these factors indicate a greater likelihood of being in an accident and may result in a higher rate at renewal—depending on the state you live in and when you signed up for Snapshot.”
While the basic benefits and drawbacks of utilizing big-data are understood, concerns about what else insurance companies can do with this personalized information still linger. Generally, insurance companies agree that data will be kept confidential in most circumstances. Wright explains that Liberty Mutual will not share collected data with any third party except in the case of servicing auto policies, for research, or as required by law. However, it’s unclear exactly who those potential third parties are, what research will be conducted, or under what lawful situations the information will be shared.
These programs collect information about where, how, and how often you travel, and UBI monitoring mobile apps are sharing space with personal information such as phone calls and messaging, photos, and various accounts. The data collected may be transferred to auto dealers and automakers. Thus, it’s best to ask questions before enrolling in a UBI program and read any updated privacy policies during enrollment. Understand that these policies will continue to change as new technology is available.
It’s clear that many vehicles are (and will continue to be) equipped with the technology to collect big data. As this technology expands, it’s important for drivers to weigh the potential benefits or pitfalls of sharing personal driving data and determine what the value of your privacy is worth.
Crosley Law Firm: Helping Car Accident Victims
Even the safest drivers can still become the victim of someone else’s carelessness, and UBI devices can become important evidence at trial. Crosley Law Firm tackles every case with unwavering attention to detail as we strive to get you the justice and compensation you deserve. Using cutting-edge tools and technology, the attorneys at Crosley Law bring their experience and knowledge to every personal injury claim.
If you or someone you know has been injured or even lost a loved one as a result of someone else’s reckless behavior, contact Crosley Law Firm at (210) 354-4500 to schedule your free consultation with one of our experienced attorneys. You can also fill out our convenient online contact form.
Statutes of limitations apply to car wreck cases, so don’t wait — contact us today.
Fung, B. (2016, January 4). The big data of bad driving, and how insurers plan to track your every turn. The Washington Post. Retrieved from https://www.washingtonpost.com/news/the-switch/wp/2016/01/04/the-big-data-of-bad-driving-and-how-insurers-plan-to-track-your-every-turn/
Usage-based insurance and telematics. (2016, June 6). National Association of Insurance Commissioners. Retrieved from http://www.naic.org/cipr_topics/topic_usage_based_insurance.htm
Zurschmeide, J. (2016, January 19). Auto insurers desperately want your driving data, but should you give it to them? Digital Trends. Retrieved from http://www.digitaltrends.com/cars/how-telematics-may-affect-your-auto-insurance-rates/
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