Privacy and User-based Insurance: A nagging Dilemma?

With User Based Insurance (UBI) on one hand and your privacy on the other, the question invariably boils down to what you consider priority. But then there could be enormous benefits in two competing options that the competition itself blurs and your dilemma becomes more acute. “In times like this, marking out priorities becomes a heady task,” James Roberts gushes with a glint in his eyes. James has been mauling over making a choice continuing with a UBI on his Toyota Camry 2012. “the benefits of a UBI is enormous, and I wouldn’t think it’s a bad idea to continue, but then again, I still have to give this much thoughts.”

Unlike in the traditional insurance policies where decisions come down to driving records, demographic factors, marital status and residence, UBI rates is based basically on your disposition. Robert Hunter, director of insurance for the Consumer Federation of America likes this new yardstick anchored on disposition, for him, how you drive and not your personality should be the point of consideration in charging your insurance premiums.

Why is UBI constituting this much test of decision-making abilities? With UBI, insurers are able to place tabs on your driving, and this goes beyond just how you hit those breaks, mileage, and speed to include, in some instances, when and where you go to. With tracking your movement, however, comes a balanced and even lower premium on the policy, including discounts and consequently increased savings. According to Jorge Wenner, CEO at Alliance Insurancecompay, discounts could get as high as 40%. Dick Luedke, the company spokesperson for State Farm Insurance explains how the benefits of UBI also inures to insurers. He explains that because of the ability to more precisely measure usage, the premium charged a customer is a reflection of the risk eventually passed to the insurers. All thanks to a monitoring that is more accurate and personalized, different from the generalization that typically underscores traditional Insurance policies.

Dan Preston, CEO of Metro mile, a UBI auto insurance provider out in San Francisco, California, makes the comparison more felt. In his view, Traditional insurance charges premiums using some generalized scale that does not make a differentiation based on individual experiences. The effect of this is that drivers who cover lesser mileage are lumped together with those who cover longer miles and charged using the same scale. The result is that a majority of the low-mileage drivers have to shoulder the cost of their high mileage counterparts. Preston advocates that drivers who drive less should pay less in premium.

As great as the story of UBI is for the insured, there is, however, one tiny area or not-so-tiny area of concern, depending on your views – UBI monitoring and the gathering of personal data. The tracking of your car’s location may give an insight into your lifestyle and reveal personal information that you would ordinarily not want out there. It is here that the dilemma lies, whether to sacrifice your personal information for the savings that a tracked driving promise. Indeed, it is a cause to worry especially these days when the theft of personal data isn’t entirely ruled out. Also, while insurers promise complete confidentiality of the information obtained, the duty of confidentiality would of course not extend to instances where there is a compilation by law.

So how does a typical UBI work? The entire framework upon which a UBI is built is on monitoring. Your insurance provider is able to keep an eye on you, somewhat like a big brother, by means of telematics technology. This technology monitors your movements, taking records of everything from mileage to acceleration, speed, breaking to accidents. If you drive well, then you stand the advantage of saving a lot on your insurance. Robert Hunters couldn’t agree any less, according to him, if you drive well, you should get something for it in form of reduced premiums. On the part of the insurer, they also benefit from being better able to monitor and gauge their risks.

Kirchen understands that the issues of confidentiality are one capable of casting a pall on the utilization of UBI as a preferred insurance policy. According to Kirchen, preference for UBIs would improve and people seeking insurance cover would get more confident if there were some measures in place addressing issues of confidentiality. Such measures could include immunity for the driver, the anonymity of the data, and/or restrictions in the manner and purpose for which the information gathered is used. He advocates that information gathered by insurance companies should not be used for purposes other than for the insurance.

Even without the measures Kirchen advises, the numbers are continually impressive for UBI. A survey by Progressive shows that almost 80 percent of consumers prefer UBI as a more transparent alternative to the traditional insurance covers and more than 90 percent of people between 18 to 34 years would choose UBI over other forms of insurance.  What is more, a study by per Strategy Meets Action researchfinds that by 2020, more than one-third of all auto insurance carriers would have switched to one form of UBI. This goes to show that people seeking an insurance cover are choosing the risk associated with UBI over handing out their fate to insurers to calculate the cost of their policy over yardsticks that are not subject to measurements.

This does not, however, detract from the concerns raised with regards to privacy and confidentiality of personal information. To stack the odds side-by-side and come to a conclusion on your insurer, it is important to ask questions before committing to a UBI. Such pertinent questions include:

• How much of your personal information would be collected by the insurer
• What are the measures in place to ensure confidentiality and privacy?
• Can you restrict the extent of information that may be collected without missing out on any advantages that come with your UBI cover?
• How far does your consent to the collection of your data go?
• What are the available remedies for improper use of collected information?
• How safe is the data protection measures of the insurer?

With UBI, the decision goes down to what you prefer the most, confidentiality over saving money or vice versa. There is no need saying that the choice is all yours.