What You're Giving Up When You Let Your Car Insurer Track You In Exchange for Discounts
A CR investigation finds the savings you get with these telematics programs may come with serious trade-offs. If you still want in, CR's interactive guide can help you find the best option.
Nancy Proctor barely drives her car. Her commute is around 4 miles, round trip, and she otherwise rarely gets behind the wheel.
So a few years ago, she asked her State Farm agent how to lower her premiums because she was driving so little—then balked at his suggestion. The agent pointed her toward State Farm’s telematics program, which offers customers discounts in exchange for permission to closely monitor their driving.
Proctor, a substitute teacher in Milwaukee’s northern suburbs, was initially put off by the amount of data she’d have to share: An app on her smartphone would record her speed, rate of acceleration and braking; note whether she was using her phone in the car, the times of day that she drives, and her location; and send all that information to State Farm.
How Telematics Works
Insurers have historically used a combination of demographic information and driving records to price individual car insurance policies. More recently, they’ve added nontraditional factors such as credit scores, education level, and job titles to the mix—a practice that can be unfair to low-income drivers and people of color, which is why Consumer Reports advocates have pushed states to ban it. Insurance prices should be based on how you drive, rather than income, where you live, or other biographical details, CR’s advocates argue.
Telematics programs can be a step in the right direction.
Telematics data allows insurers to directly evaluate a customer’s driving style and behavior, and come up with pricing that’s meant to closely reflect the individual’s likelihood of getting in a collision. That gives consumers an important degree of control over the variables that determine what they pay for car insurance.
Certain driving habits and behaviors are particularly predictive of crash risk, says Ryan McMahon, vice president for insurance and government affairs at Cambridge Mobile Telematics, which says it supplies telematics technology to nine of the top 10 insurers. Insurers use these and other factors to determine how risky a customer’s driving is, and offer better discounts to drivers who don’t exhibit these risky habits.
Chief among the dangerous behaviors is sudden hard braking, according to the company’s analysis of millions of car trips, as described in regulatory filings. If a driver routinely slams the brakes, it likely means they tend to tail cars too closely or pay too little attention to the road, McMahon says.
Another crucial indicator is cell phone use behind the wheel, which insurers’ apps can track using sensors inside the customer’s smartphone. Extreme speeding and sharp cornering also suggest risky driving, though less so than hard braking and phone use, McMahon says.
Beyond giving less risky drivers a break on premiums, insurers say telematics can lead to safer roads by giving drivers a financial incentive to be more careful. The programs also try to nudge customers toward safer driving by displaying detailed summaries of recent trips in the accompanying smartphone apps, showing where on a map they slammed on the brakes or twiddled with their phones.
“Telematics technology provides immediate feedback that can help change bad driving habits and encourage good ones,” says Mark Friedlander, a spokesperson for the Insurance Information Institute (III), an industry-funded research center.
Variations Between Telematics Programs
The information that insurance companies consider when calculating premiums varies widely by company and location, sometimes including factors that have little to do with your driving. So it’s important to dig into the details when deciding whether, or in which program, to enroll.
To help, Consumer Reports studied the telematics offerings of the 10 largest insurers, reviewing official product pages, terms of service, license agreements, and privacy policies. (These 10 are a subset of the telematics programs available to consumers: Many regional insurers offer telematics discounts, and a growing number of startups such as Metromile and Root focus entirely on usage-based insurance coverage.)
We then checked our findings with the 10 insurers. Every provider except Geico, which did not respond to CR’s requests, helped us verify the information we’d compiled. In many cases, we got answers only by asking the companies for specifics; thus, many of the details in the interactive table below are unavailable in the product and policy materials routinely shared with consumers.
The table shows the range of factors used to calculate discounts, and how the various programs define them. Click on each field to read more about that factor.
Even with the information CR has compiled, shopping for a telematics program can be difficult because some insurers are vague about how they define risk factors. For example, Geico’s DriveEasy product page says the company rates customers on driving “smoothness” and “the speed at which [they] are cornering” but doesn’t explain how fast is too fast or what constitutes an abrupt stop. And a spokesperson for Farmers told CR that it determines discounts using information about the riskiest times and days to drive—but wouldn’t say what those times and days are.
And even the most forthcoming companies generally won’t say how much each separate telematics factor weighs in their formulas for determining discounts.
That lack of transparency is a disservice to the consumers, says Bell, the CR car insurance expert. “It really should be a clear agreement with the insurer as to what information they’re collecting and what you’re being judged on,” he says. “The data factors they are using shouldn’t be a surprise.”
On Thursday, policy advocates at Consumer Reports and the Consumer Federation of America sent letters to these 10 insurers, calling on them to be more transparent about the data they collect from telematics customers, the factors they use to rate their driving, and the reasons each of those factors is relevant.
Factors Outside Your Control
With the exception of USAA, every insurer we studied uses time of day to calculate premiums, rewarding customers who tend to drive during times deemed to be safer.
While some drivers may benefit from such programs, consumer advocates say that nondriving factors like this can unfairly disadvantage certain people and groups.
“This punishes people who work the third shift, and those are typically blue-collar or service occupations,” says Douglas Heller, an insurance expert at the Consumer Federation of America. “As these are jobs disproportionately held by people of color, the time-of-day factor can be a proxy for race, reinforcing rather than diminishing discrimination.”
Friedlander, of the Insurance Information Institute, points to government data that shows an uptick in car crashes overnight due to drowsy driving. (Travelers said its claim data backs up this pattern.) Plus, Friedlander argues, blue-collar workers aren’t the only ones who have to be on the road after dark: He claims, for example, that emergency room doctors and nurses who work overnight shifts pay some of the highest car insurance rates of any drivers in the U.S.
But public opinion tends to agree with Heller’s position. A survey conducted in 2019 by a Stanford sociologist found that Americans are far more comfortable with some factors than others. Around three-quarters of respondents said it’s at least somewhat fair for insurers to use collision history or speeding tickets to make car insurance decisions, and half said hard braking and sharp turning are fair game. But fewer than a third said it’s fair to consider the time of day when a person drives.
Heller says telematics programs should stick to measuring actual driving behaviors—and that insurers should have to demonstrate exactly how every factor they’re using relates to risk. “We want rating factors to be less surrogates, and more actual tests of driving risks,” he says.
Low Thresholds for 'Hard Braking'
Another concern about telematics is that the purportedly unsafe practices they discourage are not always behaviors to be avoided. Many of the programs, for example, define “hard braking events”—the most commonly used factor among telematics programs—as a deceleration of 6 to 8 mph over the course of 1 second.
But when CR auto experts simulated various braking scenarios at our Connecticut test track in September, they found that many routine, safe maneuvers would register as hard braking events under that definition. When one tester braked to slow her car at a rate of 6.6 mph in 1 second, she found the force unremarkable. “It was just a typical stop at a stop sign or red light, where you have someone behind you so you don’t want to just coast the whole way there,” says Kelly Funkhouser, CR’s head of connected and automated vehicles.
Funkhouser found that even slowing down 11 mph over a second fell far short of an emergency stop that would cause your seat belt to lock, which is what CR’s experts consider unsafe.
Allstate, American Family, Nationwide, Progressive, Travelers, and USAA all define hard braking somewhere between 6 and 10 mph per second. Farmers, Liberty Mutual, and State Farm would not share their hard braking thresholds, and Geico did not respond to CR’s questions.
We asked all those insurers about their hard braking thresholds. A spokesperson for Travelers said its model “seeks to capture not only emergency stops but also overall aggressive driving behavior that is inclusive of harsh braking without coming to a complete stop.” And a Nationwide spokesperson said, “We recognize that our threshold will result in some braking events, but a driver would need to incur a higher than average number of these events to truly have a significant negative impact on their driving score.”
A too-low braking threshold could set up dangerous incentives, warns Jake Fisher, senior director of auto testing at CR. “It might lead someone to try to speed up to make the light when they see a yellow, fearing that a rapid deceleration might reduce their car insurance discount,” he says. And drivers should never feel they need to sacrifice their safety to get a better deal on insurance.
Nationwide spokesperson Jarrett Dunbar disputes this. “We do not feel it is a dangerous incentive to ask drivers to be focused on the driving task at hand by leaving more distance between them and the object they are going to hit,” he says.
Serious Privacy Trade-Offs
Insurers that use telematics tend to gather a lot more information than they need for determining discounts. Even if a company doesn’t use speed or phone use in its calculations, for example, it may still be tracking and recording those behaviors. The companies also generally require 24/7 access to your smartphone’s location to gather telematics data.
Sometimes that extra information is used to give drivers feedback about risky habits without altering their discounts. That’s why an Allstate telematics customer might see red flags in the Drivewise app if they were using their phone while driving, even though the program doesn’t currently dock discounts for distracted driving.
Other times, it’s not clear what the information is used for. Liberty Mutual, for example, says it may gather data including mobile phone type, ignition status, vehicle diagnostics, and fuel consumption—even though that information doesn’t figure into a user’s premium pricing or discounts.
Some consumer advocates say insurers shouldn’t be gathering data they don’t need to calculate premium levels. “They’re collecting so much,” says Heller, the insurance expert at the Consumer Federation of America. “What you end up with is this massive dataset that’s not anything as straightforward as they tell you on the front end.”
Some insurers may also be using the information for purposes you might not have considered. Nearly every company we studied, for example, reserves the right to use telematics data to analyze insurance claims—which means that information about your car’s movements in the seconds before a crash could have important ramifications.
Say you’re hit by a drunk driver, but your telematics data reveals that you were speeding at the time. Your insurer could use that information to reduce your coverage or deny your claim altogether, warns Bob Hunter, a former Texas commissioner of insurance and director of insurance at the Consumer Federation of America. “A lot of insurance companies like to find an angle to deny claims, and telematics could be an angle,” Hunter says.
Friedlander, the III spokesperson, called the allegation that insurers could use telematics data to deny auto claims “unfounded.”
“Companies shouldn’t be using telematics data for marketing,” says Justin Brookman, CR’s advocacy director for consumer privacy and technology. “Consumers are sharing their data in order to get insurance pricing based on their personal habits; they’re not expecting the companies to repurpose that data to try and market products to them.”
What’s more, the data that insurers gather has an extremely long shelf life. Half of the insurers we studied say they can hang onto the information they get from you—which can include detailed maps of your drives, when you took them, and how you drove—for as long as they want. Two companies said they typically keep the data for 10 years; others referred us to their own records retention policies but wouldn’t reveal those policies. Geico’s policy is unclear, and the company didn’t respond to CR’s questions. (Google, by comparison, deletes location history data after 18 months by default.)
“Most of these companies are still building their databases,” Friedlander says. “They’re capturing all the data they can at this point, and that’s why you’re getting responses like, ‘Yeah, we’re keeping this data indefinitely.’”
Tips for Choosing and Making the Most of Telematics Programs
Compare the Factors
If you’re considering signing up for a telematics program, you can use the information in CR’s table to pick one that works well for you.
If, for example, you have a particularly long commute, you might lean toward options that don’t currently take distance traveled into account, such as USAA’s SafePilot, American Family’s KnowYourDrive, and IntelliDrive from Travelers.
If you often drive late at night, you may want to avoid programs like Allstate’s Drivewise and Liberty Mutual’s RightTrack, which reduce discounts for frequently venturing out in the wee hours. A better bet may be Snapshot, which in most states docks discounts only for routine weekend driving between midnight and 4 a.m., or SafePilot, which doesn’t consider time of day at all.
Also be aware that some insurers say they will raise your premiums if you drive poorly while enrolled in their telematics programs. These companies can include Allstate, Geico, Progressive, and Travelers, depending on what state you live in. American Family, Farmers, Liberty Mutual, Nationwide, State Farm, and USAA say on their websites or in their terms of service that risky driving won’t lead to higher premiums, at least for now.
When comparing telematics programs, make sure the ones you’re considering are available in your state, because most aren’t offered nationwide. In California, insurers can’t use any telematics variable beyond mileage for determining premiums. And note that USAA insures only members of the military, veterans, and some of their family members.
Even the telematics programs of a single company can vary by state. Progressive and Allstate consider distance driven in only a handful of states, for example, and Progressive and Travelers don’t count phone use against customers in a few states. If you’re shopping for a telematics program, ask companies what factors apply where you live.
Keep Close Watch on the Apps
If you enroll, pay close attention to the feedback you get in the companion app, which will map your drives in detail and call out risky events like hard braking and fast starts. You can then try to minimize the behaviors with an eye to both driving more safely and lowering your premium.
Keep an eye out for miscategorized drives, too: App-only telematics programs can’t always tell whether you’re driving your own car or riding in someone else’s and may ding you for sloppy driving that isn’t yours. They may also think you’re texting and driving even if you’re a passenger or you’ve handed your phone to a passenger to use. Most programs will allow you to recategorize a drive or dispute a mistake like an out-of-date speed limit in the app, but some require you to call customer service.
Focus on the Big Picture
If there’s one piece of advice that insurers and telematics companies offer regularly to customers, it’s not to sweat the small stuff. One sudden hard brake or particularly spirited merge won’t tank your discount on its own, they say.
“Customers should not be concerned about any one or two events,” says Allstate spokesperson Billy Miller. “It is the pattern of behavior that is important to recognize and correct to be a safer driver.”
Weigh the Trade-Offs
For consumers who could really use a break on monthly premiums, telematics programs can offer considerable savings. But you have to be willing to expose yourself to extensive surveillance and to the risk that telematics data will be used for purposes other than cutting your premiums.
The choice, in the end, is quite personal. “If the product’s right with you, follow through,” says the industry group’s Friedlander. “But if you’re uncomfortable with some of the aspects we’re discussing, maybe you want to stick with traditional auto insurance.”