Telematics involves using technology to track vehicle movements to assess driving skills. With the auto owner's permission, a small device connected to the vehicle collects and sends driving data to the insurer. Similar data can also be collected via smartphone apps or through devices that are standard in many vehicles and used by the manufacturer to diagnose vehicle performance and maintenance needs. The insurer analyzes the information and shares its results with the insured driver. The data can be used as a determination factor in premium costs, rewarding good driving behavior with a lower rate, or to help new drivers learn more about safe-driving techniques.
The National Association of Insurance Commissioners forecasts that the use of telematics may grow to 20 percent within the next five years. Telematics can measure how drivers break, accelerate, and handle corners. It also collects information on location, length of drives, and time of day the vehicle is in motion. Like data collection in other industries, there are existing legal questions regarding ownership and privacy of the data provided by telematics. Additionally, how insurers collect, maintain, and use that data are critical operational decisions and are subject to cyber and hacking issues.
Underwriting tools historically have and will continue to draw scrutiny of regulators and legislators. NAMIC remains vigilant in defending underwriting freedom, including the use of telematics. NAMIC does, however, stand behind the principle that telematics should be done on a voluntary basis for insurers and policyholders. NAMIC opposes efforts to create a one-size-fits-all regulatory approach to telematics because it would adversely impact market competition between insurers and create needless administrative costs and burdens that will hinder insurers in their ability to offer telematics-based driver discounts to consumers. It would also require insurers to disclose proprietary trade secrets relating to their telematics programs.
NAMIC believes that policyholders should not be required to have such devices installed on their vehicles. As innovation goes forward, NAMIC believes the insurance industry should continue to play a leadership role as it has done historically to promote safety and the protection of persons and property.
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