Allstate wants to track your driving to determine your auto insurance rate

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Many consumers are unhappy that auto insurers are using their credit history to set premium rates. Now an alternative is in sight and some might like it even less. Insurers would be able to track how, when and where they drive.

Since the end of the summer, auto insurer Allstate Corp.

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spoke with state regulators to help lead an industry-wide effort to shift over the next few years from assessing risk in applicants with factors such as credit scores to l ‘extensive use of telematics to determine tariffs, the company and regulators said.

With telematics, insurers monitor the driving behavior of policyholders via applications for smartphones or devices in their vehicles. Insurers cut up monitoring data to adapt individual rates.

While a change could be unsettling for many people with privacy concerns, it would open up the possibility of lower rates for vehicle owners who are excellent drivers or who don’t drive a lot, and who might now be paying too much. expensive for the risk they pose.

Allstate is one of the leading sellers of policies that use telematics in conjunction with credit scores and other traditional pricing factors, and it owns a unit, Arity, which sells telematics services to other insurers.

“There is an opportunity to encourage innovation in the insurance industry, and we want to start this dialogue with regulators and others, and think about how we will get there over time,” said Rhonda Ferguson, Legal Director of Allstate, in an interview.

“It takes collaboration across the industry to achieve this, from lawmakers and regulators creating clear and consistent rules for conduct-based pricing plans to insurers advancing telematics programs and the customers who use them,” Ms. Ferguson added.

Allstate’s support for telematics is the latest development as state insurance regulators fulfill last year’s pledge to review existing practices to identify those that could disadvantage minorities. The use of credit scores by auto insurers is a concern.

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

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The Biden administration is also examining the pricing techniques of auto insurers.

Under the traditional pricing approach, insurers group applicants into actuarial categories based on characteristics such as age, gender, marital status, vehicle type and driving records, in addition of credit behavior. Many also use education and profession, which have also been criticized as unfair to certain groups of consumers. Actuaries have struggled to explain why credit factors work to predict claims activity, with some speculating that people with good credit habits have meticulous behaviors that make them prudent drivers.

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

A spokesperson for Allstate said the insurer would not speculate on the extent to which any of the traditional factors would decrease in the use of a shift to telematics.

Technology has gained ground since its introduction by Progressive Corp.

about two decades ago. But less than half of new auto insurance applicants sign up when given the opportunity, according to professional groups.

Just over two million of the approximately 22 million Allstate policyholders in total are currently enrolled. They make up a large portion of the roughly eight million people in the industry who own cars connected to telematics, or less than 4% of the country’s more than 210 million personal auto insurance policyholders, estimates the National Association of mutual insurance companies.

Telematics devices track behaviors such as hard braking and speeding, as well as times traveled, location, and total kilometers traveled. Some programs also measure distracted driving.

This detail explains why Allstate’s proposal might be a tough sell. “There are a lot of ‘ifs’,” said Jessica Altman, Pennsylvania’s commissioner of insurance, including the potential need for state legislatures to ban the use of factors such as credit.

Many people are reluctant to try telematics because of data issues or inertia, she said, with some dubbing her “Big Brother.” Working in favor of telematics, large-scale data collection “is increasingly becoming the norm for consumers,” she said.

Louisiana Insurance Commissioner Jim Donelon said, “There should be very strict consumer protections regarding what insurers can do with this telematic data… Who owns the data produced: the driver or the insurer? “

Another concern is whether the ability of telematics to focus on location could “create new problems, for example, ‘red line’ cars driving or parking ‘in certain areas, the commissioner said. Insurance District of Columbia, Karima Woods.

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