Would you be willing to give up some of your privacy in exchange for discounted car insurance premiums? It’s happening in America and it may well happen in Australia too.
Pricing car insurance
In theory, the price of car insurance should largely depend on the likelihood that you will be involved in a car accident.
For example, when you get a quote for comprehensive car insurance, they ask you questions about such things as how much you drive, how often and for what purpose. You might have noticed ads on TV from one particular insurer that claim that people who drive less during Covid have seen a reduction in their premiums.
When it comes to CTP insurance, it’s a bit different because private users pay the same. But usage is still taken into account, that’s why the price is different for taxis, uber drivers, trucks and so on.
Real time tracking
In America, major insurers offer apps that track your behaviour behind the wheel. The apps record things like sudden breaking, acceleration, mileage driven, mobile use while driving and so on. Most insurers use mobile phone apps to run these programs, others build tracking devices in the car.
This real time monitoring helps insurers to more accurately calculate the risk associated with individual drivers. In exchange, drivers get a discount of between 10% to 50%, with some reports suggesting the average is around 21%.
It would be interesting to see if a similar system could be used in Australia. There have been attempts in the past without much success.
Certainly there is an argument that safe drivers are currently subsidising unsafe drivers – particularly in the CTP scheme.
Downsides and privacy concerns
Despite the potential benefits, the use of these apps raises some important questions.
What counts as dangerous driving? If sudden breaking is necessary to avoid an accident, will that be counted against the driver?
How often does the premium change? For example, one particular insurer uses their app for a 30-day period only, and then sets the rate based on that period. Does a 30-day period really give an accurate risk profile?
What happens to the data collected by the insurer? If you change insurance companies, will the data “follow you”? Can insurance companies exchange data with each other? What if they sell the data to other organisations?
There is little doubt that the world is heading in a direction where insurers can track our driving behaviour real time but it will be important to set up an effective regulatory environment that protects our privacy. Then again, if driverless cars become mainstream there may not be any need for such a system at all.
