How Your Driving Behavior Could Be Affecting Your Car Insurance Premiums — Without You Realizing It

Car insurance companies promote telematics programs — which track your driving behavior through a mobile app or device installed in your car — as ways to promote safe driving habits. In exchange, drivers can save a substantial amount of money, potentially reducing their premiums by 10% to 40%.

However, as revealed in a report by the New York Times, telematics programs raise significant privacy concerns, and your driving habits and car usage may be tracked in ways you don’t realize, impacting your insurance premiums.

Here's how telematics programs work and what you can do to protect your information.

How telematics devices work

With traditional car insurance policies, insurers base their rates on factors such as your age, the make and model of your car, your credit and your driving history. In particular, your driving record from the past three to five years impacts how much you pay. If you have a history of at-fault accidents or driving infractions, such as speeding tickets, you'll pay much more for coverage than someone with a clean driving record.

Telematics programs make the underwriting process more dynamic and personalized. Insurers use a device installed in your vehicle or a mobile app to monitor your driving habits, including your speed, braking patterns and mileage. Those who practice safe driving habits, such as always obeying the speed limit and driving infrequently at night, can save money on their policies.

"Telematic policies are highly personalized, and for a lot of consumers, that can equal significant savings," said Gregg Barrett, chief executive officer of the WaterStreet Company, a group of property and casualty insurance industry experts.

Insurers generally offer a small discount of around 10% just for signing up for the telematics program, but you could save even more money on your car insurance premiums by adjusting your driving habits.

Telematics and privacy concerns

Car insurance costs have skyrocketed in recent years. As of 2024, the average annual premium for full coverage insurance is $1,759. This makes the possibility of slashing premiums by 30% or 40% that much more appealing.

However, there are serious privacy concerns you should be aware of before enrolling in a telematics program. According to the Consumer Federal of America (CFA), insurers rarely make clear the extent of telematics programs, leaving consumers unaware of what data is being tracked and when.

Previously, consumers had to sign up for telematics programs. But as the New York Times reports, many modern vehicles are connected to the internet, and some car companies are reporting driver behaviors to LexisNexis — a company that collects driver information and reports those details to auto insurance companies — without the driver being aware. Insurers can use that information during the underwriting process to determine premiums.

The problem has led to a class-action lawsuit filed in 2024 against LexisNexis and General Motors (GM), which alleges that the companies used invasive data tracking without consumers' knowledge.

How to protect yourself

The CFA urges stricter regulations concerning telematics and the car insurance industry to safeguard consumer privacy and protect their data.

"The United States doesn't have a single data privacy law governing the use of telematic devices or the collection of personal information," says Steve Stransky, a cybersecurity attorney based in Washington, D.C. "Rather, a few dozen state and local governments have enacted their own privacy and smart-device requirements, creating a patchwork of laws and regulations. So what may be legal in one state could be illegal in another."

Telematics devices are relatively new, and it will take some time for legislation to catch up. In the meantime, here are some things you can do to protect yourself:

1. Review your car insurance claim history report

Request a copy of your LexisNexis Comprehensive Loss Underwriting Exchange (CLUE) report. This report lists up to seven years of auto insurance claims and driving activities connected to your driver's license, and you're entitled to one free report every 12 months.

By reviewing your report, you can see what information insurers may be using to decide your premiums. And, if there are errors, such as claims that don't belong to you, you can dispute the information and freeze your report.

You can request your consumer report online at Consumer.risk.lexisnexis.com.

2. Read program terms and conditions carefully

You'll have to read and sign terms and conditions before you can enroll in a car insurance program.

"Be sure to check the privacy and data collection policies of each carrier and do a gut check on your level of comfort with the data being collected," says Barrett.

These documents can be lengthy and tedious to read, so it can be tempting to just skim through them and move on. But it's important to read these documents thoroughly to ensure you understand what you're agreeing to and how your information may be used.

"In particular, they [consumers] should identify how the insurance provider or company collecting a vehicle operator’s data may use it for their own business or analytical purposes, whether they are using it in a manner that can impact them financially, such as increasing insurance premiums, or selling it to third party advertisers," advises Stransky.

For example, many major insurers, including Progressive and Liberty Mutual, say they may share information collected through their telematics programs with third parties to manage policies, perform research and market products and services.

3. Double-check what apps or services may be active

While telematics programs offered by your insurer typically require your active enrollment and consent, there's a chance you may have agreed to being tracked without realizing it.

For instance, Root, a leading provider of telematics and usage-based insurance policies, uses an app to monitor drivers. According to the company, drivers save up to $900 by switching to Root. However, while the app primarily tracks information while you're driving, it may remain active while the car is parked or you're not driving.

Kyle Schmitt, vice president of quantitative science with Root, emphasizes that Root takes customer privacy concerns seriously.

"When someone is not on an automotive trip, Root's application strives to collect the bare minimum information required to determine when a trip is beginning," says Kyle Schmitt, vice president of quantitative science with Root. "By design, we only collect detailed sensor data when automotive transit is occurring."

With modern cars, you may not need to install a device or a new app for tracking to occur. Many newer vehicles are connected to the internet, and if you have an app from your car's manufacturer as a service like OnStar, you may have agreed to be monitored when you purchased the car or signed up for the service.

Open any apps and review the terms and conditions to see if your information is being tracked.

4. File a complaint

If you feel that a company has violated your privacy rights, you can file a complaint with state and federal agencies by following these steps:

• Contact the National Association of Insurance Commissioners (NAIC): Through the NAIC, you can find your state insurance department and submit a complaint.
• Submit a complaint to the Federal Trade Commission (FTC): The FTC can take enforcement actions against businesses that violate consumer privacy laws. You can submit a complaint online at ftc.gov/complaint.