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Will drivers give up privacy for lower insurance rates?

August 21, 2014

You might be able to save some cash on your next car insurance bill, but you'll have to forego some of the privacy you've grown accustomed to. According to a recent story from The New York Times, a growing number of insurance companies are giving drivers a new option:  Insurers will record every minute of your driving in exchange for annual discounts.

But there's a catch. The insurers will only provide a discount for those who drive lawfully and safely. That means watching your speed, limiting your braking and avoiding any erratic driving behaviors.

Sharing the data from one company to the next

User-based insurance is gaining popularity, but it comes at a price.
While the Times reported that insurers are vowing to keep the information to themselves, some people are worried that usage-based insurance will be kept in a central industry database. That means an insurance company will be able to review complete driver histories before offering a plan. Each person in the U.S. would have a driver score, similar to credit card scoring by credit reporting agencies.

“I don't see how it doesn't happen,” David Lukens, director of vertical markets at LexisNexis Risk Solutions, which assists auto insurers with driver scoring, told the Times. “There will be a tipping point where if most companies have this data, they're going to weigh the costs and benefits of sharing it.”

But it might not be only the insurers who want the data shared. Brian Sullivan, editor of the Auto Insurance Report, told the Times that excellent drivers are likely to want their insurer to share the results if and when they choose to change insurance plans.

“People are going to want to say that the driving data is mine, and I want the ability to shop that around in the same way that they do with credit data,” Sullivan said.

Tech companies looking to get into the business

User-based insurance is starting to catch on with technology companies who want a piece of the pie, according to Automotive IT.

“The combination of broader consumer acceptance, more ubiquitous technology, and carriers' recognition that they need not implement this technology themselves has created a groundswell of UBI offerings by third-party solution providers,” said Jamie Bisker, senior analyst in the property and casualty insurance division of Aite Group.

Bisker's company stated there are more than 200 specialized venders creating user-based insurance technologies for the insurance industry.

Automotive IT reported that awareness of user-based insurance tripled between 2010 and 2013 in North America and Europe. Since June 2012, this type of insurance climbed more than 60 percent in the United Kingdom alone.

The next big breakthrough could see user-based insurance tracking latitude and longitude, which would allow insurers the ability to see what roads people are using.

“A mile driven on a highway is safer than a mile on a city street with lots of intersections, but in today's world we don't know which road you're on,” said Dave Pratt, general manager of usage-based insurance at Progressive.