Despite Potential Savings, Many Drivers Are Too Worried About Data Privacy to Try Insurers’ Drive-Tracking Apps

• Only 12% of drivers are currently enrolled in an insurance telematics program, but 27% are open to trying one in the future.
• Two in three telematics users in our study said they noticed a decrease in their monthly premiums after enrolling. Among those whose rates dropped, the median savings was $27 per month (or $324 annually).
• 70% of drivers not currently using telematics would consider doing so if they were guaranteed a discount on their premium, and 56% would consider telematics if they were given a clear explanation of how their data would be used.
• Nearly 70% of drivers are concerned about the privacy of personal data tracked through telematics, and 59% are worried that driving data might not be accurately collected.
• 51% said that the cost-saving benefits of telematics could potentially outweigh their privacy concerns.

Telematics, also called usage-based insurance (UBI), tracks your driving behavior using a device installed in your vehicle or a mobile app. Data on your driving habits, such as speed, braking hard, or cell phone usage while driving, is transmitted to your insurer and is used to calculate your risk. This generally results in a discount on your premium if you drive safely, but some companies can also raise your rate if they detect risky driving behaviors.

Progressive was the first insurance company to introduce a telematics program in the late 1990s with a plug-in diagnostics device and later pioneered wireless telematics technology with the official launch of its Snapshot program in 2008. With the rise of smartphones, the way insurers track driving data has become increasingly invasive from a privacy perspective.

Although most insurance companies now offer some type of UBI program, surprisingly few policyholders are taking advantage of them. Only 12 percent of respondents in our survey indicated that they’re currently using one, while the vast majority, 73 percent, are not. It’s worth noting that many telematics programs aren’t allowed in California, due to certain state laws.

While some UBI programs, like State Farm’s Drive Safe & Save, can only work to lower a policyholder’s premium, others, like Allstate’s Drivewise, may increase rates due to unsafe driving. Based on our survey findings, most drivers benefit from a lower rate after using a telematics device: 66 percent said their premium decreased, while only 11 percent experienced a rate increase.

Among those not currently using telematics, 70 percent indicated they would reconsider if guaranteed a discount. In comparison, 59 percent would simply like a guarantee their premium wouldn’t rise.

Several companies currently offer discounts just for signing up for their program — including State Farm, Liberty Mutual (RightTrack), and Nationwide (SmartRide) — which is essentially a guaranteed discount. However, Liberty Mutual is one of the insurers that may increase rates if it detects unsafe driving, so drivers need to read the fine print.

Interestingly, about a quarter of drivers had never heard of telematics before the survey, indicating that insurers could increase adoption through better customer education.

Data privacy was another significant concern among non-telematics users, with over half saying they would be more likely to opt for telematics if insurers promised not to sell their data, were more transparent on how the data would be used, or had more control over data usage and deletion.

Misuse of telematics data is the subject of an ongoing GM lawsuit. In it, a driver claimed that GM tracked his data without his consent and sold it to insurers, making it nearly impossible for him to get coverage. However, the alleged data privacy breach in this case was by an auto manufacturer and a data broker, not an insurance company, and there don’t seem to be any cases of data misuse by an insurer.

Some insurers state in the terms and conditions for their telematics programs that they may share data with third parties, while others state that they will not sell driver data but may use it for marketing purposes. Overall, these privacy policy statements are quite vague, and our findings demonstrate that consumers would feel more confident if companies were more transparent about how they use data.

Though 90 percent of respondents agreed that it was fair to price insurance rates based on drivers’ skill level and the safety of their driving technique (which can be measured using telematics), many people in our study were wary of their driving data being collected and measured. Sixty-eight percent had concerns about data privacy specifically.

While there has not necessarily been evidence of a data breach or misuse of telematics data by auto insurance companies, this doesn’t mean it couldn’t happen in the future, and privacy concerns around data collection are valid. For example, many telematics programs require 24/7 location access using your smartphone — not only when driving. Despite the high level of concern, only 24 percent of users read the privacy policy for their insurers’ telematics programs in full.

Data security was also a concern for 56 percent of drivers, which is even more challenging to address than data privacy. Insurers are extremely vague about how they secure data. In its privacy policy, Progressive stated, “We limit access to the data we receive and use physical, electronic, and procedural safeguards to help protect it and your privacy. We will retain this data indefinitely.”

Unfortunately, there is currently no way for a driver to completely protect their privacy while using a telematics program, as they are subject to the company’s terms and conditions. Until lawmakers create more federal regulations, drivers should make sure they’re comfortable with the level of data being collected or opt out of using telematics.

That said, some programs allow drivers to use a plug-in device in their car instead of using a mobile app, which would limit the amount of data shared with insurers. This may be a more comfortable middle ground for some people.

Another 59 percent of drivers cited concerns that the data collected may not be accurate, which is a realistic concern. According to a recent J.D. Power study, only 38 percent of customers enrolled in a UBI program felt the information collected is always accurate. Reviews of insurers’ mobile apps also reveal that users think the apps frequently and inaccurately detect hard braking and other behaviors.

Another shortcoming of UBI tracking is the inability to recognize when certain maneuvers are required for defensive driving. Some drivers may engage in unsafe driving, such as rolling through a stop sign, to avoid being penalized for hard braking. However, driving safely should always be the priority — even if it means a slightly smaller discount. As telematics programs improve, this may become less of an issue.

Despite these hesitations, over a third of drivers (37 percent) said that the cost-saving benefits of telematics could potentially outweigh their privacy concerns. However, although telematics programs can help reduce premiums, nearly half of drivers worry that telematics could increase their costs. This is where research comes into play, as only certain companies use UBI to potentially increase rates — most will only use it to lower them.

Most drivers have a good sense of the data points that telematics programs often collect. The exact driving data used to calculate risk and determine premiums varies by insurer, with some relying on only a few metrics and others using five to six.

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In the table below, we analyzed privacy policies to discover the data different insurers collect through their telematics programs. All of the telematics programs we looked at track speed, acceleration, and braking patterns. Most also track the time of day and places you drive, and some track the number of miles driven and whether you use your phone while driving.

Using a phone while driving is incredibly dangerous, but interestingly, only five out of eight telematics programs track this. While tracking phone use may be more questionable from a data privacy standpoint, it is a key signifier of risky driving — as long as drivers designate when the passenger is the one using the phone to avoid unnecessary penalties.

Location data is critical to telematics programs as it allows insurers to track most other metrics such as speeding and acceleration habits and, of course, miles driven. By determining whether a driver tends to speed or accelerate and brake quickly, insurers can evaluate whether they are high-risk, as speeding is involved in about a third of traffic deaths in the U.S.

It’s important to note that awareness of the general categories of data being collected doesn’t tell the full story. If a UBI program requires a mobile app, for example, it likely also requires the driver to share their location all the time, not just when driving. Detecting phone use while driving also requires access to what someone is doing on their phone, though the exact level of that access is unclear. Geico states, for example, that it never accesses users’ contacts, phone calls, or texts, leaving a lot of activity that it could potentially be accessing.

Companies also collect additional data, including personal identifiers like name and Social Security number, and demographic information.

Telematics programs can be an effective way to lower auto insurance premiums for safe drivers. Many insurers only use these programs to potentially lower rates, making them worthwhile even for those who may engage in more risky driving behaviors — and they may even help promote safer driving.

However, many drivers have concerns about the data collected by insurers, with good reason. Companies and lawmakers have a responsibility to protect their consumers. Still, insurance providers tend to be vague about how exactly customer data is being used and stored, and the U.S. still needs more legislation around consumer data protection.

Earlier this year, the House Energy and Commerce Committee proposed the American Privacy Rights Act of 2024, but it never made it to vote. Only a handful of states, including California, New York, and Washington, have legislation surrounding auto insurance data. It’s also important to remember that customer data is being tracked by far more entities than auto insurance companies, so telematics is just one part of a larger conversation around data.

People who are very concerned about data privacy may prefer to opt out of telematics for now, and drivers who are somewhat concerned about data privacy but are interested in telematics may opt for a company that allows a plug-in device to limit more invasive smartphone tracking.

We surveyed 1,282 individuals who are in charge of auto insurance for their household, representative of the United States population based on the U.S. Census. Respondents were asked about their opinions and perceptions of fairness and privacy in auto insurance, especially with respect to telematics devices or applications.

We also downloaded the full privacy policy documents for eight leading auto insurance providers to audit the information that they gather and how they use it. We used Google AI Studio to analyze the documents and locate the relevant sections, then manually verified the data within the documents to ensure that there were no errors.