Telematics, AI & auto insurance: Data privacy and rising premiums

What driving data do the telematics apps collect?

Telematics systems track driving habits, including hard braking, speed, location, mileage, and phone usage. Keep in mind that some insurers could use the collected information to raise your rates if you exhibit unsafe driving.

The table below shows the driving behaviors some top insurers use to determine discounts, the possible discounts you may earn and whether those behaviors affect your rates.

	Allstate Drivewise	GEICO DriveEasy	Progressive Snapshot	State Farm Drive Safe & Save
Sign-up discount	10%	10%	10%	10%
Possible discount	40%	15%	25%	30%
Possible rate increase?	No	Yes	Yes	No
Hard braking	X	X	X	X
Acceleration	X	X	X	X
Mileage	X	X	X	X
Time of day	X	X	X
Phone usage	X	X	X	X
Speed	X	X		X
Location	X	X

What is the role of AI in analyzing telematics data?

As data is collected, AI can analyze it in real time. While AI can quickly analyze data, perform risk assessments and identify patterns that might not be obvious to a human, it can still make mistakes when providing instant feedback, potentially leading to accidents. Additionally, there are significant privacy concerns, including the unauthorized collection of location data and driving habits.

Ways AI can use telematics data:

With many telematics programs, you can receive real-time feedback as you drive, alerting you to risky driving behaviors such as speeding or hard braking, and allowing you to make immediate corrections.
AI can determine whether your driving behavior is likely to result in a claim and suggest higher rates. Behaviors such as speeding and using your phone while driving indicate a lack of attention that can lead to an accident.
Additionally, using location and time-of-drive data, AI can predict whether you’re likely to be in an accident. Since more accidents occur at night or on highways, AI can use your typical driving to assess risk.
AI can also suggest coverage changes based on your telematics data. For example, someone who drives very few miles may consider switching to usage-based insurance rather than a traditional policy.

Rising premiums: The price of personalization

While telematics can offer more personalized rates and discounts for safe driving, it’s a double-edged sword. Telematics data also shows poor driving habits, such as speeding and phone use, which could result in higher rates with some carriers.

For example, GEICO and Progressive may increase premiums based on data collected through their telematics programs. Drivers have to decide if the risk of higher rates outweighs any possible savings.

However, not all risky behaviors are the same. For example, driving late at night to work is not the same kind of risk as frequent speeding. Both are red flags in telematics data, and could lead to rate increases. It’s important to understand how your insurer views these risks before you sign up.

Telematics data privacy concerns: What are the real risks for drivers?

Telematics data poses a real privacy risk, especially because it allows an insurance company to know where you are at any given time and to track phone usage in real time. Beyond possible rate increases, this data may be used in other ways.

Insurance companies may sell it to third parties that can use it to focus advertising or otherwise target communications. Companies with lax privacy policies may also give your information to law enforcement without requiring the appropriate documentation, such as a warrant.

However, many states have strict laws prohibiting the use of data without a person’s consent. For example, the Texas attorney general sued Allstate and its subsidiary, Arity, for collecting data illegally through apps such as Life360 that recorded driving behavior. The data was then sold or used to increase drivers’ insurance premiums.

"Telematics programs can be a way to save consumers money and incentivize safe driving if they're narrowly focused on core behaviors such as speed and hard braking,” said Justin Brookman, director of technology policy for Consumer Reports.

“But they can start to be unfair if they start to consider other factors, such as where you drive, not just how you drive. Also, data collected for telematics pricing should be limited to what's needed to price insurance risk, and not repurposed or resold for advertising or other purposes."

Legislative landscape: How states are responding to data privacy concerns in telematics

While many insurers are upfront about data collection and usage, states are creating legislation to ensure drivers are aware of what data is recorded and how it will be used.

States putting forth telematics privacy legislation include:

Maryland - Bill 984 requires insurers to allow drivers to correct erroneous data and restrict policy increases within 6 months of the policy's effective date.
Missouri - Bill HB 1121 prohibits insurers from buying or using driving data recorded by a vehicle, including a policyholder’s vehicle.
New York - Bill S5486 requires insurers to disclose how recorded behaviors affect driving and how they are used to calculate discounts and rates, and allows drivers to access any record data.
Tennessee - Bill 195 restricts insurers from selling, sharing, or distributing vehicle data without the vehicle owner's consent.
North Carolina - BILL 81 requires that an insurer get written consent to collect, share, sell, or use vehicle data from telematics.

Expert advice: What privacy advocates want you to know

Electronic Frontier Foundation security and privacy activist Thorin Klosowski weighs in on the privacy concerns related to telematics:

“Car companies are amassing loads of data about how we drive, where we drive, and when we drive. Most companies that sell cars in the U.S. then go on to share or sell that data to third parties, including data brokers or insurance companies, which can affect insurance premiums or the types of loan terms you're offered. Since all this data exists, most notably the records of where we go, it also means law enforcement can come looking for that data.”

“Sometimes this information is collected and shared with our permission – but that permission is often given without us realizing it when we first turn on an infotainment system or download a carmaker's app. But the end result is the same, your driving data ends up with companies you've never heard of and used for reasons you'd probably not agree to if asked directly.”

“If you don't want your data going all over the place, you can try to file 'opt out' requests with the car maker directly. Instructions for this are usually found somewhere buried on the company's privacy policy page. You should also look in your infotainment system or any app you may have downloaded to see if you are inadvertently sharing data with an insurance company or other third-party companies that way.”

What can drivers do to protect their privacy and prevent insurance costs from rising?

There are ways to protect your data within the programs, such as limiting data access and understanding your state’s privacy laws.

Ways to protect your privacy with telematics include:

Know that you have a right to request data access and make corrections based on your state legislation.
Understand your insurer’s consent requirements, privacy policy, and opt-out options.
Turn off location and limit data collection in apps.
Advocate for stronger data protections within your state legislature.
Choose not to use the telematics programs offered by your insurer or your vehicle.

Drivers who opt out of telematics can still keep insurance premiums low by taking advantage of other discounts, bundling policies and frequently shopping around for more affordable car insurance.

Telematics in the age of AI: The bottom line

While privacy will always be a concern in this online age, lawmakers and insurers can work with drivers to ensure data remains secure and its use is restricted. Insurers may also streamline rate calculations and make their formulas available.

As telematics programs from insurers and vehicle manufacturers become more common, the insurance industry may have to adjust. Drivers may see policy changes, such as increased discounts, personalized premiums based on driving behavior and more transparent, stringent privacy policies.

Keep in mind that it is ultimately up to you whether to allow data collection through telematics and other apps, and it is your responsibility to understand your insurer’s privacy policy and push for stronger data-use regulation.

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