Michael Aminov-Tobin almost forgot that a car insurance company has followed his path. He didn't pay much attention to how fast he was driving or how hard he was braking. He was surprised when the company offered to insure his Hyundai Veloster Turbo for 2016 for $ 100 less than he had paid.
"When it figured out the price it did, I thought" Holy mess, that's fantastic! "
He benefited from a growing trend known as UBI, where auto insurance companies electronically monitor a customer's driving and in turn offer discounts.
Such programs can be of benefit to cautious drivers and users with low mileage, but they also raise significant privacy issues, experts say. Before the drivers agree, they must understand the risks and ask the right questions.
"The data is so rich," says Ting Zhu, associate professor of the Krannert School of Management at Purdue University, who is studying UBI. "You know exactly where you are going and when you are leaving."
The draw for the drivers
If you prove to people that they are safe drivers, the car insurance prices are fairer.
Traditional car insurance is based on your driving data and demographic factors such as age, location and marital status. Although usage-based policies still take these factors into account, they are partly based on driving behavior using telematics technology. Data is usually collected via a plug-in device for the diagnosis port of your car or an app for smartphones.
"Good drivers should pay less," said Robert Hunter, insurance director of the Consumer Federation of America. "How you drive and not who you are, must determine your rate."
Discounts can be important for good drivers. Nationwide SmartRide offers discounts of up to 40%, says David Arango, senior vice president of personal connectivity, including Auto and Home. At Root Insurance, the start-up that Aminov-Tobin insures, the best drivers can almost halve their prices, says CEO Alex Timm. According to the managers, an average saving of around 20% is achieved in both companies.
Even drivers with a low mileage can benefit from this. Evan Makovsky, 42, from Hoboken, New Jersey, estimates that he has saved $ 1,000 a year by switching to metromile, which charges a monthly rate plus a mileage. Makovsky drives his Volkswagen Passat 2009 mainly during the weekend.
However, rates with consumption-based insurance are not always the same. For example, if you change jobs and travel longer, a policy for paying per mile can be expensive. And with Progressive's Snapshot program, which monitors your driving style, the insurer says rates will rise for around 20% of drivers. Arango says that bad drivers at Nationwide do not pay extra, but they can lose their original discount.
Whether the price outbreak is worth the privacy that you specify by monitoring your driving behavior depends on how you assess the risks.
Aminov-Tobin was not worried: "If you want the best prices, you have to sacrifice a little," he says.
However, privacy lawyer Jen King fears that motorists will sacrifice more than they realize.
"Where you go every day can tell people a lot about what you are interested in, where you live and who you work with," said King, privacy director at Stanford Law School for the Center for Internet and Society.
Even if the information is not sold, it can be used in a way that the driver did not expect.
A data breach is another threat, says Purdues Zhu. It emphasizes the 2013 Target infringement, in which cyber attackers stole the personal information of millions of customers. Zhu says her research has shown that motorists tend to drop use-based car insurance after the injury.
Nevertheless, the UBI seems to have the upper hand. An investigation by J.D. Power showed that 10% of its insurance customers used such programs in 2018, compared to 8% in the previous two years. Although the guidelines are not generally available, the National Association of Insurance Commissioners estimates that 7 out of 10 motor insurers will use surveillance technology next year.
Ask before buying
Consumption-dependent insurance policies vary. Some lane brakes, idle and accelerate; others focus on mileage. Some monitors run for a limited time; continue to haunt others. That is why it is important to look around and ask questions.
The CFA Hunter says he knows exactly what information the insurer will collect and whether it is really about good driving. Also ask:
- How each piece of data influences your course.
- If you can refuse the disclosure of the information without penalty.
- When the company shares or sells your information.
- Keep in mind that driving data is only part of your insurance, says Janet Ruiz, director of Strategic Communications, Insurance Information Institute.
"The most important thing consumers can do with their car insurance is a good and safe route map," she says.