Whenever someone offers you a chance to save money by sacrificing a bit of your personal information, it’s good to be wary. When it is an insurance company – which is generally in the business of taking as much of your money as it can, while paying as little in claims as possible – you should be especially cautious.
Over the last several years, auto insurance companies have been promoting tracking devices, known in the industry as "telematics devices," to follow the driving habits of their customers. Savvy drivers have wondered what they do, how they work, and if they really help drivers save money on car insurance premiums.
When you install a tracking device in your car, it taps into the vehicle’s various computer systems to capture, store, and transmit data. What data, you may ask? Well, whatever information your insurance company deems relevant to determining whether or not you’re a good driver. This data is sent back to your insurance provider and, if they like what they see, they’ll reduce your premiums or give you credits on your auto insurance.
To be fair, tracking device programs are opt-in (for now). That means an insurance company doesn’t require you to use one in order to get or maintain auto insurance coverage – it’s totally your choice to be tracked in exchange for possibly saving some money. That may not always be the case, however, so it is good to learn about the technology before your insurance policies require an in-car tracker.
Progressive, who launched their Snapshot program in 1998, was the first auto insurance company in the United States to roll out telematics-based tracking. The program has evolved over the years, and millions of customers have used it. At first, Progressive used the program to incentivize good driving habits by offering discounts to safe drivers. However, in 2013, the company started using collected data to penalize bad drivers.
Other companies gradually followed Progressive’s example, but it took some time. Each company’s program and terms are a little different. Allstate’s Drivewise mobile app uses smartphone-based tracking rather than the more common plug-in tracking device. The potential discounts (and penalties) vary widely, and the insurance companies hold those formulas close to the vest.
If you opt in to a tracking program but it doesn’t actually save you any money, you might be able to opt out without any problems. Progressive says that its program determines whether or not to offer rewards or discounts based on six months’ worth of tracker use. Other insurance companies consider discounts as long as the tracker’s being used, but if they’re notified that the tracker is disabled or disconnected, the driver will lose any discount they’ve earned.
The Technical Details
Most insurance companies’ telematics devices are small pieces of hardware that plug into your car’s on-board diagnostics port (OBD-II port). If you’ve ever taken your car to an auto parts store, emissions test center, or mechanic and watched them use a handheld scanner plugged into the dashboard to read error codes and identify problems, it’s the same port. The devices are compatible with vehicles that have OBD-II computer systems, which include most modern cars built in the last 25 years or so.
Once the device is plugged into the car’s computer, it can see all the data the computer collects and grab whatever the insurance company has programmed it to find. It then wirelessly transmits that information to the insurance company, or a third-party company that they employ to analyze the data.
Some cars, including those equipped with newer versions of the OnStar system, don't need the OBD-II device. The General Motors OnStar Smart Driver system uses the car's own data connection to communicate with several insurance companies.
Progressive’s Snapshot program had a minor public relations problem in early 2015, when a researcher studied his tracking device and found out the data it transmitted was not encrypted, and the device was vulnerable to hackers. Progressive responded by saying that they were confident in Snapshot’s security but would investigate the claims. In short, consider this a reminder that there are potential consequences to giving a company free reign over a computer – and don’t forget that’s what controls your car.
What They Track
Some insurance companies disclose what their devices track, but others don’t, and it’s up to customers to decide whether or not those terms are acceptable to them. To be clear, an OBD-II-based tracker is capable of finding, storing, and transmitting any bit of data in the vehicle’s computer. You should carefully consider how much you trust your insurance company.
Insurance companies are mostly interested in data that paints a picture of a driver’s habits, which helps the company figure out if the driver is likely to cost them money in claims. Commonly cited types of data include when the car was used, distance driven, and time spent driving. They also want to know how fast a driver typically drives and any incidents of hard braking, both of which are indicators that the driver takes risks and doesn’t pay attention. Finally, and perhaps most controversially, the devices can track a car’s location.
In newer vehicles with high-tech safety features, such as automatic emergency braking and forward collision warning, the insurance tracking devices can capture how many times that they are activated and report that information back to the insurer.
That data, when linked to mapping data that shows what the speed limits are and what other traffic controls exist on the streets you drive on, can indicate whether you are speeding or rolling through stop signs. GPS information about whether you travel into areas where there is a higher risk of accidents or car theft, and how much you drive at night, can potentially show the insurer a pattern of risk.
If your car insurance company offers pay-as-you-drive, or another form of usage-based insurance where your rate is set by the number of miles you drive, they will likely provide you a tracker so they can make sure that you are not driving more than your mileage allowance.
Insurance companies say these data might someday be used to resolve insurance disputes – for example, using speeds and braking distances to recreate a crash scene and determine which driver was at fault, rather than relying on first-hand and witness accounts. Critics, on the other hand, don’t really see this scenario as a benefit; rather they fear that this might lead to misuse or abuse of these devices.
While plenty of customers have tried out telematics tracking programs in exchange for potential car insurance discounts, many others say it’s simply not worth it. A lot of customers have told the press that they didn’t receive discounts, even after carefully driving and earning a clean tracker record. (Of course, there’s always the possibility that the insurance agents didn’t agree on particular drivers’ records, and they’d be quick to point out that discounts aren’t guaranteed.)
Customers who opt out of the programs cite a number of privacy-related concerns. According to a study published by Pew Research Center in January 2016, location tracking is the biggest concern. Most customers understand why an insurance company would want to see speed data (the faster you go, the more dangerous it is) and distance data (the more you drive, the more risk you incur). But customers believe that GPS tracking data is irrelevant as far as driving behavior is concerned, and it crosses a privacy line many are unwilling to accept just to save a little money.
Finally, some customers say it may only be a matter of time before insurance companies require these devices, rather than simply encourage them.