Privacy issues may limit linkup between telematics, insurance

  • 03-Dec-2010 04:20 EST

Many consumers still eye telematics insurance programs with skepticism, citing privacy concerns. Progressive

As the market for telematics grows and companies start mining the data collected from vehicles, privacy will be one of the key concerns for many users. Insurance companies that are beginning to use mileage to set rates are already getting a number of questions about the data being gathered and how it will be used.

Insurers are very interested in using telematics systems to collect data that shows how vehicles are actually driven. Drivers now estimate their annual mileage when they apply for coverage. Providers want to know how close those guesses are, but drivers are leery of letting them monitor vehicle movement.

“Privacy is a ledge that you have to talk customers off,” said Richard Smith, Director of Auto Product Management for Liberty Mutual Agency Markets.

Early insurance-industry efforts to use telematics links to gather information are largely limited to one data point: the number of miles cars are driven. Many drivers are concerned that if they let insurers monitor any data, they will be able to gather more information than drivers want to give, such as when and where they went and how long they stayed.

“Consumers say they’re sensitive about what data is collected, how it’s applied, who sees it, and how long data is held,” said Richard Hutchinson, General Manager for Usage-Based Insurance at Progressive.

That’s a key reason that most companies are limiting their efforts to tracking mileage to determine whether owner estimates are close to correct. Regulators in some regions are quite sensitive to privacy concerns.

“California’s regulations prohibit insurers from using location data,” said Kyu-min Oh, Senior Automotive Analyst for Frost & Sullivan.

Though many state regulators haven’t yet established guidelines for telematics, insurance companies are pretty sure that regulations will follow the trend of overall requirements, which vary widely from state to state.

“In Illinois, we won’t need any prior approval; their complete insurance regulation is only a page,” said Ed Collins, Assistant Vice President at Allstate. “California law is voluminous. Insurers need to gain approval before they can start a telematics-based service.”

Some insurance industry representatives feel that, over time, consumers will become comfortable with sharing data and expand their use. Insurers can further refine risks by gathering information such as when and where vehicles are driven.

“An issue over the longer term is whether consumers will allow us to use things like GPS,” Hutchinson said. “Will they see enough benefits to give up some privacy?”

Liberty’s Smith noted that, in other areas, many people readily give up their rights already. For example, when consumers download applications for services like finding restaurants, they readily agree that data showing their location will be gathered.

Observers note that regardless of what data are being collected, there are some basic steps that will help this fledgling feature see success.

“Two things are fundamental for privacy concerns,” said Roger Dewey, CEO of M2MV, a consulting firm. ”Programs have to be opt in instead of opt out, and there has to be something in it for consumers.”

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