The fact that driving information from insured persons is transmitted to the insurer via OBD dongle (on-board diagnosis) or smartphone app in order to get better conditions (telematics tariffs) is not new and has also been practiced in Germany for several years . In the USA, however, data has long been transferred directly from the car manufacturer to a data analysis company, which in turn supplies the insurers – often without the knowledge of the vehicle owner. According to a report, this has an impact on the insurance premiums that US drivers have to pay.
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Der LexisNexis-Report
A 65-year-old Seattle software entrepreneur who considers himself a “careful driver” of his leased Chevrolet Bolt from General Motors (GM) was surprised when he had to pay 21 percent more for his insurance two years ago. Comparisons with other insurance companies were similarly higher than before. One factor in the higher policies, an insurance agent told him, was his LexisNexis report. The New York Times (NYT) reports this this week.
LexisNexis is a New York-based global data broker that tracks car accidents and traffic tickets, obtains driving information directly from automakers, and provides auto insurers with the collected data. The software entrepreneur then asked for his “Consumer Disclosure Report” and received from LexisNexis a 258-page detailed analysis of every trip he or his wife had taken in the Bolt over the past six months, according to the NYT.
Transparent drivers
Of 640 trips during the period, the start and end of the trip, distances traveled, speeding, emergency braking and strong accelerations were documented down to the minute for each trip. Only the locations were said not to have been included. All of the information was provided directly by the manufacturer via its Smart Drive app from OnStar, which belongs to the car manufacturer GM. LexisNexis analyzes the driving data and creates risk assessments “that insurers can use as (…) factors to create more individual insurance protection,” explains a company spokesman.
“It feels like a betrayal,” said the insured software entrepreneur that such information – which he did not know would be passed on – is being used by insurance companies. Eight insurers requested his data from LexisNexis in one month.
Tracking since 1996
Special dongels for on-board diagnostics and smartphone apps also record driving style with the consent of the insured – although the insured are usually aware of this. OnStar's Smart Driver app seems to be taking a different approach in the USA.
The OnStar vehicle communication service is owned by GM and was introduced back in 1996. At the time, OnStar, which was first introduced in Cadillac vehicles, was already using cellular and satellite technology to communicate with a driver or deploy the airbag in accident situations, according to a report. In 2003, the service was also available for vehicles from Volkswagen, Toyota and Honda and, according to GM, had two million customers. That same year, GM made money for the first time with OnStar and wanted to increase sales from $750 million in 2001 to $4 billion by 2005, the NYT reported.
Driving data directly from the car manufacturer to the insurance companies
A Ford patent application (PDF) published in 2022 states the following about the data collected by OBD dongles, which are issued by insurers and attached to the vehicle for telematics tariffs: “In the past, drivers have been reluctant to participate in these programs “. Insurers – who are referred to as customers in the patent application – could misinterpret certain vehicle characteristics such as the chassis number and the credit score does not necessarily indicate driving behavior. Insurers use this data in the USA to assess risk.
Instead, automakers collect information directly from internet-connected vehicles, which can then be used by the insurance industry. There is no need for a dongle or smartphone app to monitor driving habits.
Benefits vs. fine print
Modern vehicles connected to the Internet offer access to services such as navigation, roadside assistance and smartphone apps. The latter enable car owners to lock and unlock remotely and provide information about the tank level, range or driving data and vehicle condition as well as scheduling a workshop visit to a service partner. In addition, paid services can be booked via the respective vehicle apps – this has also been practiced in Germany for some time.
In the US, car manufacturers, including GM, Honda, Kia and Hyundai, have begun offering driver driving style assessment as an option in connected car apps. If this function is activated, the data collected about driving behavior is passed on to data brokers such as LexisNexis – often without the knowledge of the vehicle owners, writes the NYT. The consent comes via the small print and opaque data protection regulations that allow automakers and data brokers to collect detailed information from millions of American drivers.
Privacy concerns in the USA
A Cornell University law professor was surprised: “Since the average consumer cannot expect this, it should be standard practice in the industry to point this out.” Politicians have also expressed their concern about this. The California Data Protection Agency is currently investigating automakers' data collection practices, and Sen. Edward Markey of Massachusetts last month called on the Federal Trade Commission to investigate.
“The 'Internet of Things' is truly invading the lives of all Americans,” Senator Markey said in an interview. “If there is now a collusion between automakers and insurance companies to use data collected from an unwitting car owner to raise their insurance rates, in my view that is, in and of itself, a potential violation of Section 5 of the Federal Trade Commission Act.” Federal law prohibits unfair and deceptive business practices that harm consumers.