Allstate Wants to use driving Data to Determine Rates
By Eli Richardson
October 10, 2021
With many auto insurance consumers unhappy about companies using factors like individuals' credit history to determine rates the industry could be switching to an alternative. This new method would involve tacking how, when, and where consumers drive.
Starting earlier this year Allstate has been discussing with state regulators and trying to get the industry to transition to this method, also called telemetrics. This transition would involve insurers tracking driving behavior through smartphone applications or devices inside of vehicles to better fit rates to the individual driver.
Allstate is one of several insurers that has policies that use telemetrics. They want to use telemetrics to identify practices that may place minorities at a disadvantage when it comes to auto rates. One of the key factors being the use of credit scores, because of the high volume of low-income and minority consumers with low scores (Wall Street Journal).
Some main concerns surrounding current practices are also centered around how insurers group consumers into categories to determine rates. Some factors that are traditionally used are age, gender, marital status, driving records, vehicle make and model, credit history, education, and occupation.
Allstate sees telemetrics as a way to assess policyholders not on how they fit into these segments, but on their driving behaviors. Behaviors that are key in telemetrics are heavy braking, speeding, time of travel, frequency of travel, location of travel, and some even try to measure distracted driving. Using these methods could be beneficial in lowering rates for consumers that have long been overpaying for insurance.
A potential roadblock for the implementation of telemetrics in the insurance industry is data security and access to private information. Many consumers may be reluctant about the amount of access they are giving to insurance companies.
Telemetrics could be the future of the auto insurance industry. With developments in technology and access to information, policies will better fit consumers and make the industry more effective and efficient.
Source: Wall Street Journal