Insurance Technology: The Privacy vs. Convenience Tradeoff

Cars have long represented personal freedom. By owning a vehicle, anyone can go wherever they want, whenever they want. But now cars are changing. They’re becoming safer and more convenient, and while these changes are clear improvements, they can nevertheless raise questions about the loss of privacy in a machine so closely tied to personal freedom. Faced with a tradeoff between privacy versus convenience, will consumers embrace new advances in cars?

One of the biggest technological developments in recent years has been the rise of the Internet of Things, making devices smart and connected. Cars are quickly becoming more connected too. Improved diagnostics, automated roadside assistance and usage based insurance are all good examples.

Numerous startups have emerged to take advantage of new technologies. A few examples:

• Snapsheet uses technology to reduce the time needed to process claims and promises to help both insurance carriers and customers. Their website boasts an average speed of 2.7 hours from photo to estimate.
• Honk, a new app-based roadside assistance provider, promises roadside assistance without the normal membership requirements.
• Root uses predictive analytics technologies to insure only those drivers it determines to be safe enough.

Although technology has created abundant opportunities, many new developments hinge on the idea of usage based insurance. Consumers no longer have to pay a set amount. Instead, they can pay as they drive, so individuals don’t pay for miles they don’t use. Or they can pay how they drive, with good drivers receiving discounts.

The catch is that this requires data. Insurers can’t offer discounts for driving less or driving well if they don’t have a clear picture of an individual’s driving habits.

Although some may worry about privacy issues, most consumers are at least willing to consider connected models. The Pew Research Center found that 37 percent of people consider monitoring in exchange for discounts to be acceptable, and another 16 percent say the acceptability depends on the details.

Acceptance varies with age. Nielsen found that millennials are the most likely to accept usage based insurance. This may be tied to another a finding that Gallup made, that millennials are the most likely to trust companies with their private information.

Sometimes, privacy isn’t even desirable.

Several companies appeal directly to parents. Zubie, for example, offers a family plan. The fact that the device is “always on and always aware” and can be used by parents to track their teen children is presented as a benefit. Parents have peace of mind knowing where their children are. They are also reassured that they and their children have access to help should anything go wrong, and they can manage the family’s busy schedule with ease.

Consumers want convenient insurance that provides improved safety and excellent discounts. It seems that the greater the convenience, the less concern there is regarding privacy.

The rest of the technology trend story …

This is only the tip of the iceberg. Learn more about the 11 emerging trends making waves in the auto insurance industry now. Download the report here.