What Do Insurance Companies Do With Your Telematics Data?

Today, almost every insurance agent in the United States has its own telematics program. These programs, which use the Global Positioning System (GPS) and other technologies to monitor law enforcement’s movements and driving habits, often promise significant savings on insurance. Insurance companies share that they can provide the money because regular exercise reduces the risk of motorists, and telematics data provides evidence of those habits.

While it’s hard to argue with that logic, these programs – also known as usage-based insurance (UBI) – work by collecting user data. Insurance companies use this data to calculate new rates for policyholders, often on a rolling basis. But is that all they use data for?

The Use of Telematics Systems is Growing

Progressive began experimenting with UBI programs in the 1990s, but it wasn’t until cell phones became ubiquitous that the programs took off. Having cell phones with GPS systems, gyrometers, accelerometers and other technologies in cars with drivers gave insurance companies the opportunity to monitor the habits of their policy holders.

Sales of telematics machines grew from 4 million in 2010 to 16.3 million in 2020, an increase of nearly 308% in just ten years. Such a rapid and impressive increase in the sales of these programs shows that they have become a great insurance company.

Telematics Software Collects Massive Data

The nature of UBI’s software requires continuous data collection. As a result, insurance companies hold the keys to many of the policyholder’s assets. This information is not limited to how fast a person drives, for example. Telematics software tracks a variety of user behaviors and more, including:

  • Braking characteristics
  • Running
  • Using the phone
  • Running around corners
  • Time of day

It’s also possible that companies may collect other types of data related to driver safety — or may already do so. The weather while driving, for example, can be one factor. Location data can also be part of the data collected by telematics software, indicating the driver’s frequent business activities.

Telematics Data is a Fast Growing Market

Considering the size of the consumer data market, it should come as no surprise that telematics and the data it generates is a growing industry in its own right.

Globally, the value of the telematics market has skyrocketed. In 2014, the global market was worth $28 billion. By 2022, the global telematics market is expected to reach $103 billion.

Insurance Companies Jump at Chances

In 2010, insurance giant Allstate created Arity, a company that collects and processes driving data. The company immediately had access to Allstate’s reimbursement plans and information about its users’ progress.

Allstate uses data analytics and data from the Arity platform in its operations to accurately calculate insurance premiums. However, it also sells this data to other insurance providers.

“We have 6 billion pieces of data, we are risk takers,” said Tom Wilson, president, president and CEO of Allstate, on the number three revenue in 2021. “We help people do business efficiently and effectively. , and we are really building a platform that it can do a number of things.”

Arity Data Services is Growing

Through Arity, Allstate is providing its telematics data — for marketing purposes — to organizations other than insurance companies. In October 2021, the company announced that it will generate data from more than 100 million drivers through Transparent.ly, an online advertising platform. The platform allows insurance brokers to sort customers based on risk levels and find drivers they want to improve.

In early 2021, Arity has partnered with GasBuddy, an oil price monitoring program. The deal allowed GasBuddy to make recommendations to drivers based on their past driving habits and, more importantly, to deliver targeted ads. In the New York Times’ Wirecutter column, another writer described GasBuddy as a “secret horror site” due to the amount of data that the program collects and sells.

Traffic Data May Also Have Legal Purposes

The world of targeted advertising is not the only place where telematics data is being used. Data from these programs is widely used in law enforcement, criminal and civil cases.

In criminal investigations, law enforcement and prosecutors can retrieve telematics data with a court order. Being able to see when and where the accused was in a crime can provide enough evidence to prove the crime against him. Some apps can use voice recognition to verify that someone else was driving the car.

Prosecutors can also subpoena telematics data in some cases. Similar to how this data is used in criminal cases, lawyers can use location and time data to determine a person’s location or behavior in criminal cases such as divorce and child custody.

Opinions About Telematics Applications Are Still Mixed

The increase in the implementation of telematics software is a sign that the concept among drivers is approaching acceptance. Q2 report from TransUnion found that penetration rates increased from 49% to 65% between surveys, which is a 32% increase.

But that doesn’t mean people are ready to wholeheartedly embrace telematics and the data collection that goes with it. Despite the increase in opt-ins, many consumers seem to remain skeptical.

A survey conducted by Arity found that while the majority of respondents said they did not mind the insurance tracking their mileage, the majority were less so at 54%. The same survey found that only 47% of respondents wanted their insurer to know their speed.

As data harvesting becomes part of the norm, some people may begin to see it as impossible. That’s the sentiment that Alli Cooke, a telematics operator in Michigan, seemed to be expressing.

“My understanding is that I get a discount on my car insurance bill for driving carefully, which is great – although I don’t monitor the discount to see how much I’m saving,” he said. “I’m sure they use it for other things as well, including selling to those who want it. I don’t appreciate it because, unlike free social media, I’m paying for this service, but I understand that’s how business is done these days, so I try not to be offended by it.”

Governments are Starting to Realize

Issues related to telematics software and personal privacy have not been addressed by other governments. The state of California currently has a ban on such programs, the law says impressed Tesla CEO Elon Musk.

Tesla recently introduced Tesla Insurance, a utility program designed for Tesla owners but available to owners of other select vehicles. Musk has announced that he will push the state of California to change its laws to allow telematics-based insurance programs.

The federal government also took driving data as a problem. On September 20, 2022, Rep. Earl Carter (R-GA) of the US announced the creation of a congressional caucus on vehicle data acquisition. Carter invited members of the House of both parties to take part in the meeting, after which he told the press that he hoped that the parties “will work together and independently to be able to measure the responsibility of those involved and come up with traffic laws that will be supported by the regular system.” “

Telematics and marketing applications

Like most digital services, UBI app users agree to the company’s data harvesting and marketing policies when they log into the app. To this end, drivers agree to provide their data.

However, many insurance companies tend to focus on good driving habits as a reason to save money for policyholders. Insuring certain risk drivers reduces the financial risk of the insurance company, but selling the owner’s information gives the company additional income. That stream remains even if the policyholder’s rates go up or down.

With the implementation of these programs on the increase, insurers and brokers who sell data will have a large amount of driving data. With new regulations in place, businesses can find more ways to use that data, making it more profitable.

Individually, drivers should be aware that their telematics data is being sold to third parties, and possibly sold again later. People may want to factor this into their decisions, along with any income they may have.