Yes, auto insurance is intrinsically mobile; cars move around urban and rural areas in order to help drivers and passengers reach their destinations, but the reality is that since the now enormous car insurance industry sprang into life a century ago, carriers have had practically zero idea how, when and where their customers drive.
The underwriters and agents are in Omaha somewhere, while their clients are scattered across the famously broad expanse of the United States. Someone could have a deep predilection for driving 158 miles per hour in abandoned parking lots, or drive much less after starting a taxidermy shop in the garage, and her car insurance provider would have no clue unless she got a citation.
Enter GPS and telematics. Of course, GPS is already a big part of our lives, as our Garmins and our iPhones prevent us from getting lost, even while putting us in terrible danger by sucking our focus away from the steering wheel. Yet, what if insurance carriers had access to driving behavior data so they could get an even more accurate grasp of risk profiles and subsequent granular pricing structures?
Telematics monitors how you drive, and presents big data that can be accessed directly by insurance carriers. As telematics has gained a bit of traction in the last few years, it’s mainly been a hardware-plus-software solution (ie an actual device inside the vehicle that produces data to be accessed by drivers and/or insurers). Some ventures have tried to bring the technology to mobile apps, but we have yet to see much traction there.
The pros of telematics are pretty obvious. If you generally play by the socially contracted driving rules, you’ll likely earn a discount on your monthly premium. Big data doesn’t lie, and if you have the facts and figures to prove your average velocity is at the speed limit and that you drive at certain hours where the incidence of accidents is lowest, you’ll be rewarded with a smaller bill each month.
The cons of the technology are clear as well. Do we really want to let our car insurance companies, which are staffed with thousands of people we’ve never met, know our whereabouts at all times? Do we want our average speeds or proficiency with stop signs to be a matter of public record? Is all this loss of privacy worth it to save eight dollars a month? And who exactly owns the data in the end?
The good news is that you don’t have to decide right this minute. Mobile data reporting in the car insurance space is still relatively primitive, but the future isn’t far off. Big mobile players are already releasing suites of products aimed directly at car insurance providers. This technology will give the private sector insights into driving behavior like never before. Maybe the only answer is a new normal in which we’re all willing to sacrifice a little bit of privacy for some collective savings, but something tells it me it won’t shake out so clean.