Insurance companies are attracted to telematics-powered usage-based insurance programs for many reasons. It provides them more data for refined pricing and allows them to have a one-to-one connection with their policyholders, for example. But adoption of usage-based insurance is mitigated by concerns over data security, according to research.
The Insurance Research Council, an arm of The American Institute for Chartered Property and Casualty Underwritiers, surveyed more than 1,000 consumers on their attitudes towards telematics and usage-based insurance. It discovered that consumers are skeptical about insurance companies as stewards of personal data, which disincentivizes them to turn that data over.
Only about six percent of consumers have been invited by their insurer to try a telematics-based product and taken them up on the offer. A further six percent have received the offer, but declined; and among those who hadn't been offered, half of them said they were likely to turn it down if they were.
The No. 1 reason for turning down telematics was that the respondent "didn't want the insurance company to have this information about me," according to the research. That's because 81% of them were somewhat or very concerned that "information about your driving habits might be misused or inappropriately shared by the insurance company."
Consumers don't trust regulators to put the right mechanics in place, either. Sixty-six percent were somewhat not confident or not at all confident that "your state insurance department could ensure that data collected from telematics devices is not misused."
"Concerns about personal privacy and the appropriateness of sharing detailed behavior about personal behavior and driving practices with auto insurance companies are discouraging many consumers from participating in telematics programs," the report says. "Insurance companies are aware of these concerns and taking steps to assure policyholders that their personal privacy is being respected and that their personal information is appropriately used."
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