Allstate Wants to Track Your Driving to Determine Your Car Insurance Rate

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The insurer is talking to state regulators about reducing the use of credit scores in pricing auto policies.

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With telematics, insurers monitor policyholders’ driving behavior via smartphone applications or devices embedded in their vehicles. Insurers slice the tracking data to optimize individual rates.

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While a switch may be bothersome to many with privacy concerns, it will prevent the possibility of lower rates for vehicle owners who are excellent drivers or don’t drive much, and who are now paying more for their risk. are.

Allstate is a major seller of policies that use telematics in conjunction with credit scores and other traditional pricing factors, and it has a unit, Aerity, which sells telematics services to other insurers.

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“There is an opportunity to encourage innovation in the insurance industry, and we want to start that dialogue with regulators and others, and be thoughtful about that,” Allstate Chief Legal Officer Rhonda Ferguson said in an interview. How do we move with the times.”

“Getting there requires collaboration across the industry – from legislators and regulators to creating clear and consistent rules for driving-based rating schemes to insurers and the customers who use them,” Ms Ferguson said.

Allstate’s championing of telematics is the latest development as state insurance regulators fulfill a pledge from last year to eliminate existing practices that could harm minorities. The use of credit scores by auto insurers is one area of ​​concern.

Most states allow insurers to use credit-based factors, but consumer groups have long said the practice is unfair to low-income and many minority consumers because they are over-represented in lower credit-scoring categories. Huh.

The Biden administration is also investigating car insurance companies’ pricing techniques.

Under the traditional pricing approach, insurers lump applicants into actuarial categories based on characteristics such as age, gender, marital status, vehicle type and driving record, in addition to credit behaviour. Many also use education and business, which have likewise come under fire as unfair to certain consumer groups. Actuaries have struggled to explain why credit factors work to predict claim activity, with some speculating that people with good credit habits have careful behavior that makes them cautious drivers.

While Allstate stands by its current approach as actuarially sound, “sophisticated, accurate and unbiased”, Ms Ferguson said, telematics “offers an opportunity to improve the accuracy of insurance pricing.”

An Allstate spokesperson said the insurer would not anticipate that a shift toward telematics would reduce the use of any traditional factors.

The technology has gained ground since it was introduced by Progressive Corporation

almost two decades ago. But according to trade groups, less than half of new auto-insurance applicants enroll when given the chance.

Of Allstate’s approximately 22 million total auto policyholders, more than two million are currently enrolled. They make up a substantial portion of the roughly eight million individuals in the industry with cars connected to telematics, or less than 4% of the nation’s more than 210 million personal-auto policyholders, the National Association of Mutual Insurance Companies estimates.

Telematic devices track hard braking and accelerating as well as behavior such as travel hours, location and total miles covered. Some programs also measure distracted driving.

This detail explains why Allstate’s offer may be a tough sell. Pennsylvania Insurance Commissioner Jessica Altman said, “There are a lot of ‘ifs’, including a potential requirement for state legislatures to ban the use of factors like credit.

That said, many people are reluctant to try telematics because of data concerns or inertia, with some dubbing it “Big Brother.” Working in favor of telematics, extensive data collection “is becoming more and more the norm for consumers,” she said.

Louisiana Insurance Commissioner Jim Donelon said, “There needs to be very strong consumer protections around what insurers can do with this telematics data… who owns the data: the driver or the insurer?”

District of Columbia Insurance Commissioner Karima Woods said another concern is whether telematics’ ability to zero in on location “could create new issues – for example, ‘redlining’ cars that drive or park in certain areas.” Doing”.

Leslie controversy at [email protected]

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