Trouble with telematics: Auto policyholders on data intrusions, higher rates
62% of drivers think usage-based policies are fair, but some have reservations over data privacy.
Rising premiums combined with low customer satisfaction are causing nearly half (49%) of U.S. policyholders to reconsider their auto insurance carrier, according to the J.D. Power 2024 U.S. Insurance Shopping Study. The study revealed 29% of those shopping around switched to a new carrier in the past year, with Gen Z making the most changes. Some policyholders are concerned that telematics programs are the reason behind their higher rates.
Data biases
Usage-based insurance with telematics programs relies on data from the policyholder’s vehicle or an app on their smartphone to assess risk. The software tracks speed, acceleration and braking patterns to evaluate the driver’s behaviors behind the wheel, with the promise of tailored premiums based on the data analysis. Policyholders can prove they are safe drivers to qualify for lower premiums, but some have concerns about when and how this information is used and shared.
Telematics programs sound good on paper. The data can potentially lead to large discounts for good drivers and better habits, according to MarketWatch. However, the data may paint an inaccurate picture of the driver, leading to higher premiums. For example, drivers who work nights may get dinged for late-night drives because it’s considered a risky driving behavior. That disconnect often affects low-income workers the most, Michael DeLong, research and advocacy associate at the Consumer Federation of America, told NerdWallet.
Policyholders unaware of tracking
The saga of a 65-year-old man who believed himself a good, safe driver is a cautionary tale for those concerned about their data privacy and auto insurance rate. The New York Times shared the driver saw a 21% premium increase because of his Lexis Nexis report compiled from data gleaned from his Chevy Bolt and released by General Motors (G.M.) without his knowledge. Per the Fair Credit Reporting Act, he was given his consumer disclosure report with over 130 pages outlining every time the vehicle was driven for six months, including 640 trips. The insurance hike and data intrusion felt “like a betrayal.”
Manufacturers and data brokers often conceal the consent to track driving habits in the fine print or privacy policies that most insureds don’t read. G.M. features a telematics program called OnStar Smart Driver; Drivers of some G.M. vehicles report being tracked with the technology even when they did not turn it on. Some say their insurance rate went up due to the data, according to The New York Times investigation.
Distrust in telematics
Forty percent of U.S. drivers don’t know what telematics is, according to a survey by The Zebra that included 1,000 respondents who lease or own a vehicle. Breaking the numbers down by generation shows a general distrust of telematics among Gen Z specifically.
- 62% of Gen Z respondents worry about how companies use their personal data.
- 48% of the 25-to-34 age group (younger Millennials) aren’t comfortable with sharing their location data, and 31% do not want to share their driving data.
- 40% of respondents aged 35 to 44 said they are uncomfortable sharing driving data, and 54% did not want their auto insurance carrier to access their location data.
- However, 62% of surveyed drivers think usage-based insurance is a fair practice.
Despite some distrust in telematics, most Americans believe (and rightly so) that their online habits and smartphone usage are already tracked and sold. An analysis by pCloud found Instagram shares 79%, Facebook shares 57% and LinkedIn shares 50% of personal data with third parties, including locations.
Building policyholder trust
Time and time again, consumers value transparency and honesty. Gen Z seems to value personalization too, with 41% of Gen Z respondents to a separate survey saying they would sacrifice privacy for a more personalized experience. Insurance carriers with a clear policy that explains how driver data is collected and used, such as customized policies and rates, could overcome these data-sharing concerns, especially among younger policyholders.
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