Auto telematics’ potential benefits & pitfalls

Telematics can lead to lower and more fair prices, but “guardrails” are needed, Consumer Federation of America reports.

Auto insurance telematics, subject to proper oversight, could lower costs for safe drivers and replace unfair, non-driving factors used by many insurers today,” Doug Heller, CFA’s insurance expert, said.

Auto telematics has the chance to give consumers lower, fairer prices while incentivizing safe driving behaviors, but “guardrails” are needed to prevent the data collected by these programs from being misused, according to the Consumer Federation of America’s (CFA) white paper, “Watch Where You’re Going: What’s Needed to Make Auto Insurance Telematics Work for Consumers.”

“Most auto insurers currently base rates, in part, on socioeconomic characteristics such as education, occupation, and credit history rather than exclusively on driving-related factors,” Michael DeLong, a research and advocacy associate with CFA and co-author of the white paper, said in a release. “Telematics programs could move away from those harmful practices and really help consumers, but that means insurers must stop using these non-driving factors and demonstrate that telematics do not create different forms of unfair discrimination in the market.”