GPS-Based Monitoring Stirs Up Controversy for Car Insurers

Most people think of their car’s GPS as a way to get from here to there with ease and fewer problems, since the directions are dictated to the driver.  But over the past few years, more insurance companies have used telematics devices that sometimes have GPS capabilities as a key technology behind usage-based insurance (UBI) programs that measure how a car is driven to determine insurance costs. Some claim it reduces prices, while others are concerned about drivers being monitored.

In a recent write-up on UBI, the National Association of Insurance Commissioners said that, “many industry experts predict that UBI is poised for rapid growth in the U.S.,” with 1 out of every 5 vehicle policies incorporating “some form of UBI” within five years.  The bottom line: UBI is here to stay.

GPS Could Become “Big Brother”

Some fear that GPS-equipped UBI programs equate to “Big Brother” watching drivers. That’s because an in-car device is installed that monitors vehicle usage of all kinds—like how far the car is driven, what time of day it is driven, how hard the car brakes—and records that usage as data that can net drivers discounts (i.e. safer drivers get cheaper policies). But many are concerned that insurers can also use the data to track drivers’ whereabouts at any time and infringe upon their privacy.

GPS Car Monitoring for Insurance PurposesImage used under Creative Commons from mecookie.

In fact, this CBS News piece calls out the GPS-equipped UBI craze with George Orwell’s famous line: “Big Brother Is Watching You.” The article was published in 2010, as Progressive debuted its UBI program, first called MyRate and now called Snapshot, and the industry interest in UBI began to take hold.

In summer 2010, consumer advocates cried foul when Progressive tried to introduce the telematics program in Pennsylvania. One of the factors that helped allay their fears was the fact that the company said the devices used in that state would not include a GPS capability.

Since the widespread introduction of Snapshot, more insurers and drivers have decided that UBI may be a good option for policyholders who want their insurance to cost less. This summer, Allstate put its UBI product, called Drive Wise, to its employees for an in-house test. The program is already available in Illinois, Ohio and Arizona; it’ll expand to more states this year.

Driving Behavior Changes When Monitored

According to a written statement from Allstate, “internal data for the usage-based insurance product has shown dramatic changes in driving behavior by employees,” adding that during the initial part of the testing, only a fourth of participating drivers scored in the desired “safe zone” but, as the test continued, that number increased to three-fourths of drivers.

Drive Wise gives participants a 10 percent discount in their first policy term that they use the device. From then, customers’ “driving behavior and total mileage driven determine the savings.”  According to Allstate, driving scores can’t inflate rates, but “savings of up to 30 percent can be earned by drivers with the safest driving scores and lowest mileage.”

Some Drivers Given Insurance Discounts

Drive Wise gives participants a 10 percent discount in their first policy term that they use the device. From then, customers’ “driving behavior and total mileage driven determine the savings.”  According to Allstate, driving scores can’t inflate rates, but “savings of up to 30 percent can be earned by drivers with the safest driving scores and lowest mileage.”

Reductions to the cost of coverage have made UBI programs more popular—however, claims that it doesn’t invade privacy aren’t convincing some that believe GPS-based monitoring in cars will create a considerable amount of controversy. Insurance companies maintain that although some of the telematics devices do have GPS capabilities, they are installed to monitor when and how far they drive, not where they drive to.

Guest Author: Leah Gillis writes about car insurance issues for OnlineAutoInsurance.com.

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