Drivers tap brakes on insurers’ data devices
Some who install ‘telematics’ like the discount, but others fear lack of privacy.
CHICAGO — To hear Progressive Corp. Chief Executive Glenn Renwick tell it, insurance telematics seem to have hit a speed bump.
When the carrier asked motorists if they’d be willing to install a device that would monitor their driving in exchange for potential discounts of up to 30%, about 40% of survey takers said “no way in hell,” Renwick recounted during a recent conference call with analysts.
This year’s disclosures that the National Security Agency routinely violated privacy protections for years haven’t helped insurers sell people on the benefits of telematics, such as making insurance pricing more accurate.
In only one year, the per- centage of telematics executives who believe that such programs will become widely adopted in the next three years has fallen to 22% from 30%, Joe Reifel, an AT Kearney partner, said recently at a telematics conference in Chicago.
“Actual adoption is a little on the challenging side,” said Deloitte Director Andrew Goldberg.
Most major U.S. insurers currently offer usage-based insurance programs, which track habits such as braking and mileage. Worldwide, subscriptions for driving-monitoring gadgets and apps are expected to grow from nearly 6 million at the end of 2013 to 107 million in 2018, connectivity trends forecaster ABI Research said in June.
Still, there are challenges to participation, mainly related to privacy concerns.
Participation is increasing but “people are scared” and confused, said Theodore Poulos, insurance specialist for the Leech-Bridges Inc. agency in Zion, Ill. So far, about 3% of clients have signed up.
“This is not a GPS device,” Poulos said at the Telematics Update conference. He said consumers’ key concern is the device will track their location. “We have to educate the consumer.”
“More people are expressing interest and declining to participate,” James Kane, president of Hub International Personal Insurance in Chicago, said at the conference.
Pinnacle Actuarial Resources Inc. shared results at the conference of an analysis of about 2,000 sentiments expressed on Twitter about Progressive’s Snapshot telematics device over a recent 10-month period.
People not using Snapshot were the most negative. Their biggest concern was privacy, particularly the belief insurers might track their locations despite assurances the technology monitors only mileage, braking and other driving habits.
The tweets were nearly evenly split between people who weren’t using Snapshot and those who were in various stages of using it. In tone, 55% were negative, 26% were positive and 19% were neutral.
“There’s still an inherent distrust of insurance companies,” said Roosevelt Mosley, a principal at Pinnacle. Although telematics have “definite long-term potential,” carriers need to address concerns, Mosley said.
Mosley shared this tweet: “I’m waiting for someone to leak documents showing the NSA can track people with the Progressive Snapshot thing.”
Also deterring consumers is the fear that devices such as Snapshot will cause rates to rise if their bad driving habits are discovered. Frequent hard braking, for example, can hurt a person’s chances of getting a big discount because it suggests careless driving.
Besides braking habits, the discount for Progressive Snapshot users is also influenced by how many miles are logged each day and how often policyholders drive between midnight and 4 a.m. Generally, savings are greater the less mileage people rack up, and the fewer number of times they drive in the wee hours, which is a more dangerous time to be on the road.
Progressive and other insurers, however, have assured policyholders that the devices won’t be used to penalize them, only to reward good driving behaviors.
Once Snapshot is plugged in to a portal on the dashboard, users can log online to see the latest projected discount. Also visible are a review of specific trips and an overview of driving habits.
Among those using Snapshot, the chance to save money was the main reason for signing up, according to the Twitter sentiments analyzed by Pinnacle. Some consumers also thought the devices might help them become better drivers.