Increasingly, Big Data – make that Big Brother? – is in the front seat of your car, and is affecting how much you pay for auto insurance.
In theory, “usage-based” or “pay-as-you-drive” insurance sounds perfectly reasonable and fair. Instead of profiling drivers based just on the traditional factors—age, location of residence, history of accidents and traffic violations, and so on—a small device is installed into the car that monitors how drivers actually drive.
These programs, including Allstate’s “Drivewise” and Progressive’s “Snapshot,” have been available for several years in select locations on a strictly voluntary basis. Drivers have been welcoming these devices into their cars because, at least for now, they’re being presented on a “discount only” basis. That is, drivers whose habits are deemed to be sufficiently safe—easy on the brakes and gas pedal, limited long-haul trips or driving during “risky” hours—can see their premiums drop by 5%, 10%, sometimes upwards of 30%.
On the downside, consumer advocates worry that these devices cause drivers to give up their privacy, and that no one really knows what the long-term repercussions could be by welcoming insurance companies inside cars. Just about every article written on the topic includes the phrase “Big Brother.”
Now, reports the Wall Street Journal, these programs are expanding in a big way. State Farm, the country’s largest auto insurer, has plans to promote its “Drive Safe & Save” program in nearly every state by the end of 2013. The main selling point is that by accepting these devices in their vehicles, customers can prove that they’re safe drivers who deserve cheaper insurance rates.
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Certain categories of people who are generally assumed to be unsafe drivers stand to benefit in particular. “We know that 16-year-old drivers have a whole lot of accidents,” Scott Bruns, State Farm’s telematics expert, told the Wall Street Journal, “but not every 16-year-old is a lousy driver.”
Some have been skeptical about the degree to which drivers would readily welcome insurance companies into the front seat of their cars. In a Businessweek post published last autumn, two consumer behavior experts predicted that these pay-as-you-drive programs “won’t move the needle much” mostly because the less-than-exemplary drivers out there won’t let insurers into their vehicles. And the safe drivers will have reason to be bitter about getting cheaper rates once the driving monitors are placed in their cars: