A smartphone in a car displaying a GPS navigation map that could collect telematics data.

What do insurance companies do with your communications data?

Today, nearly every major insurance provider in the United States features their own telecommunications software. These programs, which use GPS and other technologies to monitor policyholders’ miles and driving habits, typically promise significant savings on insurance policies. Insurance companies share that they can provide these savings because consistently practicing safe driving habits reduces the driver’s risk of an accident, and telecoms data provides evidence of these habits.

While it’s hard to argue with this logic on the face of it, these programs – also known as Usage-Based Insurance (UBI) – work by collecting massive amounts of user data. Insurance companies use this data to calculate new rates for policyholders, often on a rolling basis. But is that all they’re using the data for?

The use of remote information systems is increasing

Progressive first started experimenting with UBI software in the ’90s, but it wasn’t until smartphones started to come into their own that the software started appearing. Having smartphones with built-in GPS, gyrometers, accelerometers and other technology in cars with drivers has given insurance companies an opportunity to monitor the habits of their policyholders.

Sales of telecommunications systems grew from 4 million in 2010 to 16.3 million in 2020, roughly a 308% increase in just one decade. This rapid and dramatic increase in sales of these programs indicates that they are becoming an important insurance product.

Telematics software collects large amounts of data

The nature of UBI programs requires them to collect data constantly. As a result, insurance companies have the keys to a huge amount of data about their policyholders. This data is not limited to the speed a person is driving, for example. Telematics software tracks a range of user behavior and other data, including:

  • braking habits
  • acceleration
  • phone use
  • turning speed
  • time of the day

It is also possible that companies may collect other types of data incidentally related to driver safety – or may actually do so. Driving time weather, for example, could be a factor. Location data can also be part of the data set collected by telecommunications software, indicating which companies the driver tends to visit most frequently.

Data Telematics is a fast growing market

Given the growth of the consumer data market, it should come as no surprise that information technologies and the data they generate is also a thriving industry in its own right.

All over the world, the value of the telecommunications market has exploded. In 2014, the global market was valued at $28 billion. By 2022, the worldwide telecommunications market is estimated to be worth $103 billion.

Insurance companies jump at this opportunity

In 2010, insurance giant Allstate founded Arity, a company that collects and synthesizes driving data. The Company immediately gained access to Allstate’s backlog of claims data, related information and other user data going forward.

Allstate uses data and data analysis from the Arity platform for its own operations to calculate premiums more accurately. but, Also sell this data to other insurance providers.

“We have 6 billion miles of data, and we’re in the process of capturing risk,” Allstate Chairman and CEO Tom Wilson said on a third-quarter 2021 earnings call. And so we’re really building a platform that will do a number of things.”

Arity’s data operations are expanding

Through Arity, Allstate provides its data remotely – for marketing purposes – to entities other than insurance companies. In October of 2021, the company announced that it would provide data from more than 100 million drivers through Transparent.ly, an online advertising platform. The platform allows insurance marketers to sort customers by risk levels and find specific drivers they want to target.

Earlier in 2021, Arity made a deal with GasBuddyGas price monitoring application. The partnership has allowed GasBuddy to make suggestions to drivers based on past driving habits and, perhaps most importantly, deliver targeted advertising. In a column in Wirecutter in the New York Times, one writer GasBuddy described as a “privacy nightmare” Due to the amount of data the app collects and sells.

Driving statements can have legal ramifications, too

The world of targeted advertising is not the only area where telecom data is used. Data from these programs is increasingly used in the legal system, in both criminal and civil cases.

In criminal investigations, law enforcement officials and prosecutors can remotely retrieve contact data with a court order. The ability to know when and where the accused was during a particular crime can provide strong evidence to support the case against him. Some apps can use voice recognition to confirm that a specific person was in fact the person driving the car.

Civil litigants can also remotely recall contact data in certain cases. Similar to how this data is used in criminal cases, attorneys can use location and time data to establish a person’s whereabouts or behavior patterns in civil cases such as divorce and custody battles.

Attitudes toward Telematics software remain mixed

The increasing adoption of telecommunications software is a sign that sentiment among drivers is moving toward acceptance. TransUnion’s Q2 Report It found that subscription rates rose from 49% to 65% between surveys, a 32% increase.

But this does not necessarily mean that people are wholeheartedly ready to embrace information technologies and collect the accompanying data. While opt-outs have increased, it appears that many consumers remain suspicious.

An Arity study found that while the majority of those surveyed said they wouldn’t mind their insurance company tracking their mileage, that majority was a very slim 54%. The same study found that only 47% of those surveyed wanted their insurance company to know their speed.

As data aggregation becomes part of the status quo, some people may start to see it as inevitable. This is the attitude that Alli Cooke, an IT user in Michigan, seemed to reflect.

“My understanding is that I get a discount on my car insurance bill as a result of careful driving, which is a nice perk – although I don’t monitor that discount to keep track of the actual savings,” she said. “I’m sure they use that data for other purposes as well, including selling it to interested parties. I don’t appreciate that because, unlike free social media, I pay for this service, but I understand that’s how business is done these days, so I try not to get upset about it.”

Governments are starting to take notice

Problems with telecommunications software and personal privacy have not gone unnoticed by some governments. California currently has a ban on such programs, which is a law It caught the attention of Tesla CEO Elon Musk.

Tesla recently launched Tesla Insurance, a usage-based program designed for Tesla owners but available to owners of select other vehicles. Musk has announced that he will push the California government to amend its laws to allow IT-based insurance programs.

The federal government has also recently taken up driving data as an issue. On September 20, 2022, U.S. Representative Earl Carter (R-GA) announced the formation of a congressional rally around access to vehicle data. Carter invited members of the House of Representatives from both parties to the caucus, later telling reporters that he hoped the parties would “work collaboratively and on a bipartisan basis to assess the positions of these stakeholders and come up with draft vehicle data access legislation that would be supported through the regular system.”

Telematics software is a trade-off

Like most digital services, users of UBI software agree to the company’s policies for data collection and sale when they sign up for the software. To this end, drivers agree to hand over their data.

However, most insurance companies tend to focus heavily on safe driving habits as a reason for the policyholder’s savings. Insuring a less risky driver verifiably reduces the insurance company’s financial risk, but selling the policyholder’s data gives the company an additional revenue stream. This trend remains intact whether policyholders’ prices rise or fall.

As the adoption of these programs increases, insurance companies and the intermediaries who sell the data to them will have access to increasing amounts of driver data. Without implementing the new regulations, companies will likely find more and more ways to use that data, making them more profitable as a result.

On an individual level, drivers must assume that their telematics data is being sold to third parties, and may then be resold. People may want to take this into account in their decisions, along with any potential savings they may have.

#insurance #companies #communications #data

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