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How Your Online Behavior Could Affect What You Pay for Car Insurance

The U.S. auto insurance industry may be collecting and using data about consumers’ online behaviors…

  • December 4, 2018

The U.S. auto insurance industry may be collecting and using data about consumers’ online behaviors and preferences to calculate what people pay for their car insurance policies, a new study from car insurance search engine The Zebra finds.

The Zebra’s report explores how 35 “digital footprint” preferences or behaviors could serve as risk indicators, and how those factors could affect someone’s auto insurance premium in real dollars. For example:

  • Android owners could pay $32 more while iPhone owners might pay $70 extra each year.
  • Gmail users might pay an additional $100while AOL users save the same amount.
  • People online at 9:00 a.m. might see savings of $17, while those online at 3:00 a.m. could pay an additional $58 in premium.

Insurance companies have the technical ability to track online activity — whether by interacting with consumers online, via in-car devices that monitor driving, or by purchasing data.

In fact, insurers are already tracking consumers’ online activity for purposes other than setting rates, such as fraud detection, claims processing, and marketing.

“Industries around the world are leveraging big data to their advantage — whether they’re lenders in the U.S. considering a user’s web browser before offering a loan or they’re European insurers using people’s email addresses to price rates. So, we asked ourselves, ‘Is this happening in the U.S. auto insurance market today? What might that look like?'” says Alyssa Connolly, The Zebra’s Director of Market Insights. “Someone’s behavior online generates mountains of data that can help companies learn about consumers — the question is: does that help or hurt consumers?”

Consumers: Unfair for Insurers to Use Digital Footprint Info!

The Zebra conducted a nationwide survey, asking consumers to consider whether 30 data points would be fair for insurance companies to use for pricing their policies (underwriting).

  • Approximately 60% of consumers said they consider the use of every digital footprint factor — things like their web browser activity, their typing habits, and even their private social media activity — that could conceivably be used to price auto insurance as “unfair.”
  • 71% of respondents are not OK with insurers tracking their behavior even if they were guaranteed to save money.
  • More people said it was fair to use a person’s race (which is currently illegal) in underwriting than any of the digital footprint factors.

Benefits and Drawbacks of Big Data in Insurance Underwriting

The insurance industry is being reshaped by technology. Big data can improve accuracy and stability in underwriting, reduce consumer costs, and support the 11% of people with little to no credit history, who may be younger or in underserved communities.

Potential drawbacks of leveraging this data for insurance underwriting include the argument that these factors are unfairly discriminatory and irrelevant.

Some people are skeptical of the unproven technology, and worry that consumer privacy could be jeopardized. Ultimately, state regulators will be responsible for determining if digital footprint factors are fair for insurers to use.

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