In­sur­ers’ mon­i­tor­ing of drivers a con­cern

Austin American-Statesman - - FRONT PAGE - By Tim Ea­ton teaton@states­man.com

Some worry prac­tice may lead to higher rates.

Flo, the overly ea­ger Pro­gres­sive In­surance em­ployee of tele­vi­sion com­mer­cial fame, might not be rid­ing along with pol­icy-hold­ers, but her com­pany is plant­ing de­vices un­der cus­tomers’ steer­ing wheels to record their driv­ing habits.

The idea is to col­lect data on how a ve­hi­cle is driven and use it to cal­cu­late the owner’s pre­mi­ums. While the pro­gram gives bet­ter drivers lower rates, it has raised pri­vacy con­cerns and wor­ries that data col­lec­tion some­day might lead to higher rates for some drivers.

Pro­gres­sive isn’t the only in­surer seek­ing to col­lect driv­ing data, but it is lead­ing the in­surance in­dus­try’s ef­fort with its Snap­shot de­vice, which the com­pany is push­ing on TV ads. Other com­pa­nies – such as State Farm, All­state and GMAC – are also ex­plor­ing so-called us­age-based in­surance.

Pro­gres­sive says when cus­tomers agree to plug Snap­shots into their cars’ data ports, they can end up sav­ing up to 30 per­cent on rates. The Snap­shot de­vice, which can be in­stalled in any car built af­ter 1996, of­fers Pro­gres­sive a way to see how of­ten cus­tomers are hard­brak­ing (of­ten a char­ac­ter­is­tic of speed­ers and tail­gaters), when they are on the road (do they drive dur­ing dan­ger­ous hours af­ter bars close?), and how far they are driv­ing (be­cause more hours be­hind the wheel cor­re­spond with a higher like­li­hood of get­ting in an ac­ci­dent).

The in­ter­na­tional con­sult­ing firm Tow­ers Wat­son re­ports that the U.S. is on the brink of an in­surance rev­o­lu­tion with us­age-based in­surance. A Tow­ers Wat­son report says that early adopt­ing in­surance com­pa­nies “are gain­ing an enor­mous com­pet­i­tive ad­van­tage.”

Mark Hanna, a spokesman for the In­surance Coun­cil of Texas, agreed there are ad­van­tages to us­age-based in­surance, but he noted a down­side.

“The big ben­e­fit is low in­surance pre­mi­ums,” Hanna said. “The op­po­site view­point is ba­si­cally Big Brother is watch­ing me.”

Hanna said low-mileage drivers, par­tic­u­larly el­derly ones, of­ten are drawn to us­age-based in­surance pro­grams. But younger drivers might not be as en­thu­si­as­tic, Hanna said.

“Their driv­ing habits are not go­ing to par­al­lel those of their par­ents or grand­par­ents,” he said, adding that younger drivers of­ten won’t want to share the de­tails of how they drive.

Pro­gres­sive’s Snap­shot uses tele­met­ric tech­nol­ogy, which al­lows for wire­less data col­lec­tion, that is also found in the so-called “black boxes,” the data recorders in­stalled by some auto man­u­fac­tur­ers. But un­like black boxes, which one day could be stan­dard in all cars, Pro­gres­sive’s de­vices are vol­un­tar­ily in­stalled and col­lect lim­ited data, said Richard Hutchin­son, us­age-based in­surance gen­eral man­ager at Pro­gres­sive.

The plug-ins do not use global po­si­tion­ing sys­tem tech­nol­ogy, Hutchin­son said.

“We don’t care where you drive,” said Scott Spriggs, se­nior prod­uct man­ager for Pro­gres­sive in Texas.

Pro­gres­sive wouldn’t say how many Tex­ans are par­tic­i­pat­ing in the pro­gram, which has been many years in devel­op­ment. The cur­rent it­er­a­tion has been around since Jan­uary 2011, the com­pany said.

Spriggs said his com­pany is seek­ing to get a bet­ter idea about cus­tomers’ true driv­ing habits and of­fer them a risk-free way to lower their rates.

Now, the pro­gram is vol­un­tary and risk free, Spriggs said. Cus­tomers’ rates won’t go up for par­tic­i­pat­ing, he said, but he added that “it may not be like this for­ever.” Also, the com­pany has never dropped a cus­tomer be­cause of in­for­ma­tion gath­ered from a Snap­shot de­vice, and it doesn’t share any in­for­ma­tion it gath­ers, Spriggs said.

Deeia Beck, who runs the state’s Of­fice of Pub­lic In­surance Coun­sel and is an ad­vo­cate for con­sumers, said some peo­ple could see ben­e­fits from Snap­shot and other sim­i­lar de­vices if they are gen­tle drivers, such as ones who drive pri­mar­ily dur­ing day­light hours, fol­low the traf­fic laws and don’t travel too many miles.

But there might be a down­side too, Beck said.

“On the mi­nus side, there may be things that weigh against you that are not your fault,” she said. “For ex­am­ple, a sud­den stop be­cause some­one cuts you off in traf­fic.”

Beck also sig­naled that she has other wor­ries about us­age-based in­surance.

“My ma­jor con­cern sur­rounds how this data can be used and for how long,” Beck said. “The an­swer is we do not really know.”

In­surance com­pa­nies’ “cre­ative ac­tu­ar­ies” come up with new pre­dic­tive models all the time, Beck said.

“There may be data cap­tured that you think is harm­less but in fact may lead to a higher rat­ing scheme,” she said.

De­vices like Pro­gres­sive’s Snap­shot might be in a small por­tion of to­day’s au­tos, but Tow­ers Wat­son con­sul­tants think sim­i­lar and more so­phis­ti­cated de­vices soon could be­come much more per­va­sive — and so prob­a­bly will be the de­bate over us­age-based in­surance.

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