'Pay-as-You-Drive' Auto Insurance Raises Privacy Concerns

22 Oct 2011

As the auto insurance industry is heading down with so-called „pay-as-you-drive" insurance rates, based on a monitoring system, privacy concerns are raised. Where Insurers are contend that basing rates on how drivers use their cars can cut rates, privacy advocates call it a Big Brother system.

Among the first companies to adopt the system was Progressive Corp. Followed by State Farm and Allstate Corp. with similar programs. Proponents state that rates based on such an in-car monitoring system are more fair because safer drivers and people who drive less have subsidized the costs for those who drive more or recklessly. Insurers also predict that the system encourages safer or reduced driving, which could lead to fewer crashes and insurance claims.

Especially with State Farm's inclusion of a GPS to track a car's location, consumer advocates are concerned about privacy invasion. According to the company such data is not used to calculate premiums but rather to offer roadside assistance and other services.

Insurance companies acknowledge that the product is not for everyone. "We knew right out of the box that some consumers would not want it because they don't want a box in their car gathering details on how they drive," said Allstate's Daniel Kraft. On the other hand, the „pay-as-you-drive"-system can save up to 25% in insurance rates.