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Many auto insurers offer to reduce customers’ premiums by as much as 30 or 40 percent if they agree to allow companies to monitor how, when, and where they drive.

This real-time data collection, known as “telematics,” is often referred to as “usage-based insurance.” For some drivers, data can be uploaded directly to insurers from connected vehicles; for others, monitoring is done via smartphone apps.

Telematics is marketed as a way to better align premiums with a specific driver’s risk, and reward those who drive safely.

“The programs give drivers a financial incentive to drive less, and, depending on the information monitored, to drive more carefully,” said Loretta Worters, vice president for media relations at the Insurance Information Institute, an organization that represents the industry. “The more positively they react to the incentive, the less they pay for their insurance.”

Worters said telematics have been shown to improve driving behavior. She cited an industry survey done last year that indicated 48 percent of the drivers using telematics said they made significant safety-related changes after participating in the program.

Telematic programs were first introduced about 25 years ago, but they really took off during the pandemic. A 2021 survey by J.D. Power found that 16 percent of drivers said they were enrolled in such programs, double the amount from five years earlier. About one-third (34 percent) said they were willing to try it.

Ever-rising auto insurance prices helped drive up demand. Nationally, full coverage auto insurance currently costs an average of $2,014 a year, according to Put another way: The average driver in the U.S. now spends nearly three percent of their income on car insurance. No wonder so many motorists are looking for insurance discounts, even if it means giving up some privacy.

But consumer groups, including Consumer Reports and Consumer Federation of America (CFA), urge caution. They say stronger regulations are needed to ensure these data collection programs actually benefit customers.

“Without effective oversight, telematics programs could result in unfair pricing, improper use of personal information, racial and ethnic discrimination, and data security, among other concerns,” CFA warned in a 2021 whitepaper.

How It Works

Insurance companies use many factors to determine their rates. What they can use depends on state law; almost all states allow them to consider age, gender, vehicle, and location of their homes. Most states, but not all, allow insurers to use credit scores, job titles, and education levels. See our “Auto Insurance” section for more info on how insurers determine their rates, what you can do to lower your costs, and how to shop for coverage.

Nine of the 10 largest insurers in the U.S. now offer telematics programs that measure driver behavior. They have catchy names, such as Snapshot (Progressive), Drive Safe & Save (State Farm), and DriveEasy (GEICO).

Those who sign up for this usage-based insurance (UBI) typically receive an immediate discount, with the promise that their premiums will be adjusted at renewal time. With some insurers your rates could go up if their proprietary algorithms determine you’re a higher-risk driver.

Checkbook visited insurance company websites and found that many list vague descriptions of what they track and consider: quick acceleration (or smooth driving), hard braking, speeding, fast cornering, distracted driving, mileage, and time of day.

But what does hard braking mean? What constitutes distracted driving? And how much weight does each factor carry when computing a driving score? There’s a glaring lack of transparency.

A Consumer Reports investigation found the information provided to be “confusing and opaque.”

“The devil is in the details, but not all of the details of how these programs work and how your premium rates will be affected are easy to understand or publicly disclosed,” said Chuck Bell, a policy advocate and insurance expert at Consumer Reports. “It really should be a clear agreement with the insurer as to what information they’re collecting and what you’re being judged on. The data factors they are using shouldn’t be a surprise.”

Of the top three insurance companies, only GEICO clearly explains what distracted driving means: “Handheld phone calls and active phone use when driving faster than 6 mph.”  Also, “touching your phone for any reason (GPS, minimizing screens, unlocking your phone, etc.),” could negatively impact your drive score, the website warns. This includes another passenger using your phone, “since the app cannot distinguish who is using the phone during the trip,” the company warns.

Clearly, this data collection is far from foolproof. As Progressive acknowledges on its website, the technology “lacks the ability to know when you're driving defensively—like braking suddenly and swerving to avoid hitting an animal or pedestrian.”

Auto testing experts at Consumer Reports have concluded that telematics programs “can unintentionally encourage people to drive more dangerously—for instance, to avoid penalties for ‘hard braking,’ telematics customers might choose to simply roll through stop signs.”

When CR studied the telematics programs offered by the 10 largest insurance companies, most reserved the right to use the driving data collected to analyze insurance claims, “which means that information about your car’s movements in the seconds before a crash could have important ramifications,” the editors wrote.

Is This Really a Better Way to Set Premiums?

Michael DeLong, a Research and Advocacy Associate at the Consumer Federation of America (CFA), sees the potential benefits of telematics—if the data collected are used to move the industry away from using what he calls “harmful factors” that are not connected to accident risk, and that lead to many people paying more.

DeLong worries that insurers will use telematics “to unfairly discriminate” against some people. For example, a customer could be tagged as low-income—and therefore a perceived higher-risk  customer—based on location data that show where they live and where they drive, he said.

Consumer advocates also have privacy concerns. They assume insurance companies are gathering more information than they need for setting premium prices. Consumer Reports found that most insurers “generally require 24/7 access to your smartphone’s location to gather telematics data.” All of this information can be used for targeted marketing.

“Companies shouldn’t be using telematics data for marketing,” said Justin Brookman, CR’s advocacy director for consumer privacy and technology. “Consumers are sharing their data in order to get insurance pricing based on their personal habits; they’re not expecting the companies to repurpose that data to try and market products to them.”

The industry acknowledges that the use of telematics programs has raised privacy concerns. Even so, usage-based insurance is “gaining popularity and many auto insurers are beginning to offer it as an option to customers,” the Insurance Information Institute’s Worters told Checkbook. New Insure-Tech start-ups, such as Metromile and Root Insurance have also entered the marketplace.

Regulations Lacking and Needed

Most state insurance regulators have not developed rules or procedures to deal with this new high-tech approach to underwriting and pricing auto insurance. The lack of regulatory safeguards in place creates “all sorts of possibilities for abuse,” CFA’s DeLong told Checkbook.

A few states have developed some specific rules about telematics. For example:

  • California’s regulations require “verified actual mileage programs” to be voluntary, and collecting any data other than mileage is prohibited.
  • New York’s guidelines limit data collection to those factors needed to calculate discounts, and those data cannot be used to increase premiums or not renew policies.
  • The Washington State Office of the Insurance Commissioner requires informed consent when telematics devices track location.

In its white paper, CFA called on state regulators to protect consumers by implementing the following rules:

  • Limit what data insurance companies can collect and use.
  • Require insurance companies to show how the data they collect are related to risk.
  • Require transparency, by allowing consumer groups, regulators, and consumers to see how the insurer’s algorithms work. And those algorithms should be tested to make sure they do not adversely affect any groups of people.
  • Any data collected should only be used for evaluating risk, and should not be shared or sold.
  • Telematics should not be required to get auto insurance. Those who sign up should be able to unenroll at any time.

Telematics will undoubtably grow more complex and widespread in the coming years, and because of that, consumer advocates urge regulators to adopt rules now to ensure this new technology benefits all consumers.

More Info: Consumer Reports has tips on choosing telematics programs and how to make the most of them.

More Info: Checkbook’s advice on shopping for auto insurance, plus ratings of companies for quality and price.


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Contributing editor Herb Weisbaum (“The ConsumerMan”) is an Emmy award-winning broadcaster and one of America's top consumer experts. He has been protecting consumers for more than 40 years, having covered the consumer beat for CBS News, The Today Show, and You can also find him on Facebook, Twitter, and at