Wednesday, July 30, 2008

Car 54, Where Are You (and how's your insurance)?

A few months ago, we reported on efforts by some insurers to link data from folks' GPS systems to their insurance rates. The idea is that by monitoring where insureds traveled (and how long it took them to get there), and other data, the carrier could more accurately assess (and rate for) the risk. On its face, this seemed innocuous enough.
But there are also privacy concerns, and worry over just how this data will be used. And, over course, there's a "slippery slope" from insureds voluntarily submitting this data to legislation mandating that it be supplied.
Progressive Insurance (headquartered here in the Buckeye State), has introduced a new program that sort of straddles that line:
To some extent, this makes sense. For one thing, auto insurance employs many of the same principles as health insurance: stop-and-go driving, peeling rubber, and such might be likened to smoking or high fat diets. All of those indicate a higher risk, and should generate a higher premium to offset it. And the program is voluntary: Progressive "has begun offering its drivers the chance to cut their costs based on how they actually drive."
So far, they're not requiring it.
But that could change: I recall some years ago that at least one insurer sent out an innocent-looking survey to its customer base, asking (among other things) whether that person owned a radar detector. Those who answered in the affirmative saw a spike in their auto premiums, even though they'd had no accidents or tickets.
And Progressive's not alone in looking for "creative" ways to re-underwrite risks: GMAC Insurance has linked data from the auto manufacturer's OnStar program to ostensibly offer discounts to safer drivers. That program also is voluntary. For now.
As we noted back in February, though, those who "watch the watchers" are somewhat skittish about the whole concept. There's a real fear that once companies start collecting this data, it may be difficult to control:
"Charles Samuelson, executive director of the American Civil Liberties Union of Minnesota...has worries about privacy.
We see this as kind of a creeping abduction of people's data," he said. "Basically, once they collect that data, it belongs to the insurance company. That's a big problem."
Maybe. Risk management is always at odds with behavior: what people should be doing is very often not reflected in what they actually are doing. And it does seem fair to reward those who practice good risk-management techniques (e.g. careful driving) while penalizing those who don't.
Personally, I'd also like to see this data used to target folks who are almost as dangerous as speeders: slow-pokes. Fair's fair, and if we're going to penalize those who break the speed limit, we ought to be having a talk about folks who drive dangerously slow, as well.
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