To Save Money on Insurance, Drivers Are Agreeing to ‘Incredibly Intrusive’ Monitoring Technology

How much do you value privacy? Consumers are looking for ways to save money on auto insurance as premiums rise rapidly, and that's driving more people to consider insurers' (controversial) programs that offer savings if you agree to share driving data from a phone app or an in-vehicle device.

Usage-based insurance (UBI) programs, also known as telematics insurance, have a fairly simple premise: If you can demonstrate that you’re a low-risk driver based on your behavior behind the wheel, you’re rewarded with a lower premium.

With car insurance costs up 22% in the past year, drivers are increasingly shopping around to find the lowest-price option. They're also looking for ways to save with their existing insurers, and telematics insurance discounts could potentially help. But is it worth it, and just how much of data actually gets shared?

The programs typically monitor data that relates to how you drive, when you drive or where you drive — or, some combination of the three, explains Deloitte Principal Matthew Carrier, who consults with insurance clients.

“The industry and certain carriers recognized that this data could allow them to evaluate risk better and better match the price of the insurance for the risk,” Carrier says.

Examples of what’s tracked include hard braking, sharp turns and texting while driving. The programs may also consider your mileage and the routes you take, among other factors indicating the kind of driver you are.

Erica Eversman, president of the Automotive Education and Policy Institute, argues that you’re trading privacy to save money with these programs, and that’s not a deal she’s willing to make.

“I think ​​it is incredibly intrusive. It provides a significant amount of data to insurers, and we don't necessarily know what they are doing with that data and whether they are being responsible with that data,” she says.

Drivers look to usage-based car insurance to save

The share of auto insurance customers who participate in one of these programs (currently 17%) nearly doubled from 2016 to 2021, but there's been little growth in recent years, according to J.D. Power.

Breanne Armstrong, director of insurance intelligence at J.D. Power, says that UBI programs are slightly more popular among recent car insurance shoppers, with 19% enrolling in a program and receiving a discount.

"It’s possible that enrolling in UBI isn’t top of mind for non-shoppers, while shoppers are more likely to be looking for an opportunity to save money, and UBI might give them that option," Armstrong says.

Usage-based car insurance has been around for more than a decade, but the early versions of the technology generally relied on devices you’d have to install in your car.

Now, lots of new vehicles are sold with built-in systems for sending data to insurance companies. Customers also have more options to participate with smartphone apps like Geico's DriveEasy or State Farm’s Drive Safe & Save.

Depending on the program, you may have to drive with the tracking on for 30 days to six months before your discount (if any) kicks in. Some insurers also offer an immediate discount as an incentive to sign up.

Keep in mind that when you use an app to track your driving, it will likely also track your phone usage while behind the wheel. For example, GEICO’s DriveEasy program monitors handheld phone calls and the use of your phone when moving over 6 mph.

Should you opt in?

The pros and cons of enrolling in a usage-based car insurance program depend on what type of driver you are and where your priorities lie.

Insurance companies may think you’re a higher-risk driver if you’re accelerating fast, braking aggressively, making sharp turns, using your phone while you drive, coming home at 3 a.m., taking dangerous roads or simply driving a lot.

If you don’t do any of those things, you might get a larger discount — though exactly how much you'll save with these programs is unclear, experts say.

Auto insurance companies claim you can save up to 20-30% on your premium with usage-based insurance, but Michael DeLong, research and advocacy associate at the Consumer Federation of America, emphasizes that those are maximums, and the real savings are probably much lower. Unfortunately, there haven’t been any reliable studies on how much drivers are actually saving, he says.

Critics of usage-based insurance programs say you shouldn’t have to give up your privacy just to get affordable car insurance, among other potential problems like phone battery drain or the technology classifying you as a bad driver leading to a premium increase. (Many insurance companies, however, claim your rates won’t go up based on the data it collects when you enroll in a telematics program.)

A New York Times report found that a massive amount of data is being collected on some drivers with vehicles that have built-in collection technology: One consumer was shocked to discover that LexisNexis had 130 pages of data on his trips that included documentation of his speeding, hard braking and fast accelerations. In the previous month, multiple insurers had requested the customer's info from the analytics company.

On the other hand, proponents argue it can be a win-win for customers and insurers: Drivers save money and auto insurance companies can price their insurance products more efficiently.

What do the users think? According to J.D. Power, while participants have concerns about the tracking accuracy, they report higher satisfaction with the price of their insurance than other customers.

The firm's latest data shows that "UBI is being offered less frequently during the shopping process than it has been at any point in the past 5 years," Armstrong says. "This means auto insurance shoppers are likely driving UBI participation vs. carriers explicitly offering it during the shopping process."

In 2024, 15% of shoppers are being offered UBI when they shop, down from 22% last year, according to J.D. Power.

Drawbacks of usage-based car insurance

There are a number of possible issues and downsides of usage-based car insurance, consumer advocates say.

For example, some companies deem late-night driving to be dangerous, which is unfortunate for people who work late hours. “That could disproportionately hurt low income consumers who are working at these jobs,” DeLong says.

The technology also has its limitations: If you’re at the wheel focused on the road, but someone in the passenger seat is changing the music on your phone, the app may think it’s observing distracted driving and count it against you.

It's also important to keep in mind that you may actually end up paying more for car insurance by opting in, especially if you put in a lot of miles on the road. While there are other ways for insurance companies to see how much you drive — mileage is often documented when you get service on your car at a dealership — a sensor inside the car can be the “ultimate” tool for insurers to identify drivers who are spending a lot of time on the road, Carrier says.

In the event you get in an accident, an insurance company could potentially use collected data to try to prove you were at fault, according to accident lawyers. Geico acknowledges that it may use DriveEasy data “to help speed up the claims process.”

Sarah Graziano, a civil attorney at Hensley Legal Group in Indiana who represents injured parties, adds that the data can be subpoenaed in civil and criminal cases. For now, this is relatively uncommon, but she expects that to change as more insurance companies promote discounts and more drivers opt in.

The Consumer Federation of America says it is worried that the data insurers are collecting on participants’ movements could be misused, DeLong says, noting that most states lack regulation preventing it from being sold to advertisers.

However, DeLong recognizes opting in or not is a tough decision for drivers. He admits that it could make sense for some people — if you’re a good driver, you drive fewer miles than average and you're comfortable with the privacy protections provided by your state’s laws.

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