Car insurance companies promote telematics programs which track your driving behavior using a mobile app or a device installed in your car as a way to encourage safer driving habits.
In return, drivers can save a significant amount of money, potentially lowering their insurance premiums by 10% to 40%.
However, a report highlights major privacy concerns, revealing that these programs may track your driving habits and vehicle usage in ways you may not be aware of, ultimately affecting your insurance rates.
Here’s a closer look at how telematics programs operate and what steps you can take to protect your personal data.
How Telematics Devices Work
With traditional auto insurance policies, insurers calculate premiums based on several factors, including your age, vehicle make and model, credit history, and driving record.
Notably, your driving history over the past three to five years plays a key role in determining your rates. If you have prior at-fault accidents or driving violations such as speeding tickets you’ll likely pay much higher premiums than a driver with a clean record.
Telematics programs introduce a more dynamic and personalized approach to underwriting. Insurance companies use either a device installed in your vehicle or a mobile app to track your driving habits, such as speed, braking patterns, and mileage.
Drivers who maintain safe habits like obeying speed limits and avoiding late-night driving can benefit from significant discounts on their policies.
“Telematic policies are highly personalized, and for a lot of consumers, that can equal significant savings,” says Gregg Barrett, chief executive officer of the WaterStreet Company, a firm specializing in property and casualty insurance.
Most insurers offer an initial discount of approximately 10% just for enrolling in a telematics program. By adopting safer driving behaviors, policyholders may unlock even greater savings on their insurance premiums.
Telematics and Privacy Concerns
Auto insurance rates have surged in recent years. As of 2024, the average annual premium for full coverage is $1,759, making the prospect of reducing costs by 30% or 40% all the more attractive.
However, before signing up for a telematics program, it’s essential to be aware of the potential privacy risks.
According to the Consumer Federation of America (CFA), insurers often fail to clearly disclose the extent of data collection, leaving many drivers unaware of what information is being tracked and when.
Previously, consumers had to actively opt into telematics programs.
But modern vehicles are increasingly connected to the internet, and some car manufacturers are automatically sending driver data to LexisNexis a company that gathers and distributes driver information to auto insurers without the owner’s knowledge.
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Insurance companies can then use this data during the underwriting process to set premium rates.
This issue has sparked legal action. In 2024, a class-action lawsuit was filed against LexisNexis and General Motors (GM), alleging that they engaged in invasive data tracking practices without consumers’ consent.
How to Protect Yourself
The CFA has called for stricter regulations on telematics programs and the insurance industry to ensure consumer privacy and data protection.
“The United States doesn’t have a single data privacy law governing the use of telematic devices or the collection of personal information,” explains Steve Stransky, a cybersecurity attorney based in Washington, D.C.
“Rather, a few dozen state and local governments have enacted their own privacy and smart-device requirements, creating a patchwork of laws and regulations. So what may be legal in one state could be illegal in another.”
Because telematics technology is still relatively new, it may take time for comprehensive legislation to catch up. In the meantime, here are several steps you can take to safeguard your personal information:
1. Review Your Car Insurance Claim History Report
You can request a copy of your LexisNexis Comprehensive Loss Underwriting Exchange (CLUE) report, which contains up to seven years of auto insurance claims and driving-related records associated with your driver’s license. Consumers are entitled to one free report per year.
Reviewing this report allows you to see what data insurers may be using to calculate your premiums. If you find any errors such as claims that don’t belong to you you can dispute the inaccuracies and request to have your report frozen.
2. Read Program Terms and Conditions Carefully
Before enrolling in a telematics-based insurance program, you’ll need to read and agree to the terms and conditions.
“Be sure to check the privacy and data collection policies of each carrier and do a gut check on your level of comfort with the data being collected,” advises Barrett.
These documents can be long and tedious, making it tempting to skim through them quickly. However, it’s crucial to read them thoroughly so you fully understand how your data will be used.
“In particular, they [consumers] should identify how the insurance provider or company collecting a vehicle operator’s data may use it for their own business or analytical purposes, whether they are using it in a manner that can impact them financially, such as increasing insurance premiums, or selling it to third-party advertisers,” Stransky explains.
For instance, major insurance companies like Progressive and Liberty Mutual state that they may share telematics data with third parties to manage policies, conduct research, and market new products and services.
3. Double-Check What Apps or Services May Be Active
Although most telematics programs require active enrollment and consent, you may have unknowingly agreed to tracking in some cases.
For example, Root Insurance, a leading provider of telematics-based policies, uses a mobile app to monitor drivers. The company claims that policyholders can save up to $900 by switching to Root.
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While the app is primarily designed to track driving habits, it may still collect data when your car is parked or not in use.
Kyle Schmitt, vice president of quantitative science at Root, acknowledges the importance of privacy concerns.
“When someone is not on an automotive trip, Root’s application strives to collect the bare minimum information required to determine when a trip is beginning,” Schmitt states. “By design, we only collect detailed sensor data when automotive transit is occurring.”
Additionally, with many modern vehicles being internet-connected, you may be monitored even without installing a separate app or device.
If you use an app from your car’s manufacturer such as OnStar you may have already consented to data collection when purchasing the vehicle or signing up for the service.
To better understand what data is being tracked, review the terms and conditions of any apps linked to your vehicle.