It is impossible to ignore telematics application in every realm of the consumers’ life. Whether it’s Facebook eavesdropping, or Alexa listening in on conversations to help perfectly tailor our social world around us, the concern always comes back to the well-being of our private information. A good majority of individuals are still highly skeptical to the use of technology overstepping its boundaries. In spite of these feelings, auto-insurers now want telematics’s aid in tailoring individuals’ auto policies.
Under normal circumstances, credit history play a large role in determining an individuals’ rate for auto-insurance. While not a very favorable component, mega auto insurance companies are suggesting a more tailor-made approach that tracks an individuals’ driving, easily installed via app or in the vehicle itself. Allstate claims this integration is the next step in fulfilling their promise to help end any systemic discrimination towards minority or lower income clientele. Additionally, it helps lower rates for owners who are excellent drivers overpaying for the limited risk they pose, and quite frankly, do not drive very much.
Under Biden Administration Scrutiny
Despite the fact that most actuaries struggle to explain just how lumping drivers into actuarial categories like “marital status,” “credit score,” “education,” and “occupation” accurately depict likelihood of being in an accident, Allstate stands by it. Moreover, with car insurers’ techniques under harsh Biden Administration scrutiny, Allstate’s Chief Legal Officer, Rhonda Ferguson, agrees this is a great opportunity to improve their accuracy.
On the surface, replacing credit history with telematics seems like a great trade-off. I mean, how often are we actually in a car wreck? If we are a safe driver, the system will reward us and our rates will drop. However, if we replace one component with a tracking system that collects data on hard breaking and speeding, hours of travel and location, total miles driven, and distracted driving, who actually pays the biggest price? While an individuals’ credit score does seem highly irrational in concluding ones’ rates, these additional components bring on the question of pseudo-objectivity. All the while, Allstate has taken special care in refraining from signifying just how much these added tracking components will help fiscally save.
More Components, More Problems
According to the National Association of Mutual Insurance Companies, there are currently 2 million of Allstate’s 22 million policyholders testing in this implementation. With old techniques under criticism for placing minorities at a disadvantage, these new components beg on several new questions. Firstly, who owns the data collected – the mega, leading national selling insurance company or insured? Similarly, what role does the Department of Motor Vehicles (DMV) play in insurance companies acquiring this data?
If a component such as credit score is detrimental in dictating minority rates, hours of travel and location will surely cause the same individuals’ rates to increase. Statistics show that lower income and minority individual’s drive longer commutes, and cannot afford the same quality of neighborhoods for residency. Facts like this suggest that these components implemented in auto-insurers telematics such as hours of travel, location and total miles driven would actually cause more of a redlining effect.
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