Insurance companies using telematics technology facing increased scrutiny over privacy issues
State authorities are increasingly scrutinizing the use of telematics data by insurance companies in response to rising concerns about data privacy. In a recent move, Texas Attorney General Ken Paxton sued Allstate and its telematics partner Arity for allegedly conspiring to collect and sell data from over 45 million Americans. This lawsuit follows a class action lawsuit filed in Illinois against Allstate, and a class action lawsuit against Progressive and Toyota for sharing customers' driving data without consent in Texas.
In the wake of these legal actions, several U.S. states—Maryland, Missouri, New York, North Carolina, and Tennessee—introduced legislation focused on transparency and consumer protection, such as:
- Maryland Senate Bill 984: Requires insurers to disclose what data they collect for telematics purposes.
- Missouri House Bill 1121: Prohibits insurance companies from purchasing driving data from third-party sources like manufacturers.
- New York Senate Bill 5486: Requires insurers to disclose their methodologies for calculating telematics discounts to the superintendent and the public.
Though North Carolina's House Bill 81 has seen significant momentum, the other bills have stalled in committees or been withdrawn entirely. In general, only 21 percent of Americans trust companies with their data, according to a 2023 study by the Pew Research Center. The study also found that 42 percent of Americans are "very worried" about companies selling their personal information without their consent.
These developments leave many drivers wary of the trade-off between rising premiums and data privacy concerns. However, telematics can offer significant savings and, potentially, disrupt an outdated insurance pricing system based on third-party data and demographics. Ryan McMahon, senior vice president of strategy at Cambridge Mobile Telematics, suggests that data minimization frameworks could enhance privacy protection and make telematics a more viable option for consumers.
In the meantime, consumers should exercise caution when considering enrolling in usage-based insurance programs:
- Read privacy policies carefully.
- Understand your rights under state laws.
- Seek clarification from your insurer's dedicated support team for its telematics program.
- Learn about your automaker's telematics practices, as they may share your driving data in partnerships with insurance companies.
- Evaluate the costs and benefits of telematics wisely, balancing potential savings with privacy risks.
As more states debate data privacy legislation and offer varying protections, it is essential for insurance consumers to be aware of the legal landscape governing telematics data in their state.
- As the use of telematics data by insurance companies faces scrutiny due to concerns about data privacy, some drivers might be hesitant to adopt usage-based insurance programs to mitigate the risk of compromised privacy.
- In an effort to enhance privacy protection and make telematics a more attractive option for consumers, data minimization frameworks could be implemented, offering significant savings and potentially disrupting the traditional insurance pricing system.
