Privacy poses obstacle for insurance telematics

  • 22-Sep-2011 05:18 EDT

Allstate’s telematics systems monitor hard braking.

Telematics technology is beginning to transform the insurance industry, but there are still hurdles that must be overcome before connected vehicles become the norm. Privacy is a major concern in some areas, though many providers feel that the issue will fade quickly.

Insurance companies are quickly turning to telematics to monitor driving conditions and distance traveled. But there’s some concern that drivers will be leery of letting these providers monitor their driving habits.

As this new market segment emerges, insurance providers are still trying to determine what factors can help them set rates for connected vehicles. Distance driven is a key factor for all auto insurance, and it’s collected by all vendors who supply what’s commonly called usage-based insurance. Some programs collect more information.

Allstate’s Drive Wise program, first offered in Illinois late last year, goes beyond basic distance data. The company stores instances of hard or extreme braking and instances of high speed—particularly those greater than 80 mph (129 km/h).

But that type of data may not be gathered in California, which limits data that can be gathered via telematics. “Today in California, only mileage can be monitored,” said Adam Cole, General Counsel for the California Department of Insurance. “We saw strong resistance to use locational data, so we took that off the books. There was a lot of resistance from privacy advocates.”

While California’s regulators acquiesced to privacy groups, many industry representatives at the recent Insurance Telematics USA 2011 conference in Chicago questioned the validity of these concerns.

“There are already all types of systems that monitor you—grocery store frequent shopper programs, any computer that goes on the Internet, toll road passes,” said Nate Bryer, an Allstate Insurance Manager. “I think privacy is a non-issue. Once people realize that it’s not like big brother is watching them, we will see a lot more growth.”

For this growth to occur, insurers will have to offer consumers discounts or other attractions to encourage them to let the companies monitor their driving. Companies that use such telematics-based systems offer discounts ranging from 10 to 50%. Some industry observers feel that some customers raise privacy issues because they don’t feel the benefits are worth the bother or the risk that the insurer might gather some data that could potentially harm them financially.

“Sixty-two percent of online Americans use Facebook. It’s hard to see that there’s more risk to telematics than to put your naked pictures on Facebook,” said Harald Trautsch, CMO at Octo Telematics. “It’s not that customers don’t want to give companies their data; it’s that they don’t see enough benefit.”

Other observers suggest that consumers will accept telematics as long as they are in charge of the decision. “Privacy is not an issue as long as you give people a choice to opt in and the ability to control their data,” said Remi Demerle of telematics supplier Telenor Connexion.

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