Handle "pay-as-you-drive" insurance data with care, ABI warns

The Association of British Insurers has published a guide on how to handle telematics data collected for usage-based car insurance pricing schemes

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Insurers must be transparent about how they will use telematics data collected for "pay-as-you-drive" car insurance schemes, the Association of British Insurers has warned. 

Collecting and analysing telematics data from their customers' cars, usually through a device installed by the driver, allows insurers to offer usage-based pricing and calculate premiums based on driving behaviour. Insurers including the AA, Admiral and the Co-operative all offer telematics-based products.

But in a new guidance document published today, the ABI warned that the success of telematics-based car insurance products will depend on whether customer trust insurers with their data.

"Maintaining consumer confidence in telematics products will be a key determinant of the long-term viability and success of the telematics market," it wrote. "Consumers need to trust insurers to treat them fairly and protect their personal information."

To maintain this trust, insurers must not only abide by the Data Protection Act themselves, but also ensure that customers understand how their data will be used. 

"Consumers should have access to an explanation of the collection and use of any piece of data that could impact them directly," it said. "The prominence of that information, in policy documentation or online, should be proportionate to the importance of the data in terms of how it impacts a policy, or how sensitive it is to a policyholder."

Insurers must also communicate how they use the data to calculate policy prices, especially when the algorithms that process telematics data are upgraded.

"Were policies to increase without a reasonable explanation as to why they have increased, or by an unjustifiable amount, it would be difficult to maintain consumer confidence in telematics products, and would see insurers facing unnecessary challenges from consumers about why changes have been made," the ABI wrote.

Other recommendations from the ABI include ensuring that data is deleted when a policy is terminated and reassuring customers that their data will only be given to law enforcement authorities when legally compelled. 

Last month, insurance giant AIG Europe signed up to mobile telco Vodafone's "pay-as-you-drive" insurance technology platform. 

Vodafone claims that its platform offers insurers greater value than alternatives by collecting telematics every second. 

"Analysing granular data allows a much deeper understanding of the context of driving behaviours, which gives a much greater understanding of the likelihood of claims," said Duncan Anderson, head of pricing and product management at Towers Watson, a US-based insurance software and services provider with which Vodafone developed the system.