The insurance industry thrives on calculating risk really, really well.
To calculate risk, you need lots of information.
Until recently, what auto insurers know about drivers has been very crude — a few demographic clues, like age and sex, and the occasional driving misdeed that happened to catch a police officer’s eye.
But what if insurers could know far more? Where drivers go and when, speed and acceleration, time of day, when trips start and end? Braking: sudden or gradual? What if they could get in the car with you, and measure a dozen different things about your driving, by way of a little black box that talks to a database that compares you to thousands of other drivers?
What if, having measured the details of what drivers do on the road — and which ones ended up filing claims — insurers got better algorithms that predicted risk to their bottom line, based on what their little black boxes were silently telling them?
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It’s a daily reality for drivers who agree to electronic monitors in their vehicles (“usage-based insurance, or UBI”) in exchange for a cut to their insurance rates. The amount they save varies.
In the Canadian Automobile Association’s program, drivers get a five per cent discount when they sign up, and up to a 15 per cent discount if they renew, senior official Robin Joshua wrote in an e-mailed response to questions. They may qualify for further discounts, based on reports from their boxes.
Six thousand drivers have signed up for the CAA’s program, of whom about 10 per cent later withdrew, he wrote.
(Signing up is something of a bet that your insurance company will agree that your driving skills are as good as you may like to think they are – the CAA’s program will soon be able to compare your speed to local speed limits.)
If all that monitoring makes you uneasy, many Canadians do too.
A 2014 survey by the federal Privacy Commissioner showed that 75 per cent were concerned or very concerned about privacy risks associated with the boxes. Of people responding to a CAA poll in 2015, 50 per cent thought that these kinds of devices “put my privacy at risk and offer little benefit to me, ” while only 28 per cent said that they “deliver worthwhile benefits, and I am not concerned about the risk to my privacy.”
For now, in Ontario insurers are only allowed to offer user-based insurance on an optional basis, and to offer only discounts, not penalties. Guidelines just published by Alberta’s regulator are similar.
In other words (in Ontario) if the black box told your insurer that you were a terrible driver who has only been lucky so far, they’re not allowed to do the rational thing and raise your rates, or drop you as a customer. They’re also not allowed to require you to have a box as a condition of coverage.
“We’re more concerned about how it would work in the future,” says Brenda McPhail, a privacy expert at the Canadian Civil Liberties Association.
That “could change over time if UBI becomes more prevalent in the insurance marketplace,” warns a 2015 report on driver privacy prepared for the B.C. Freedom of Information and Privacy Association.
Insurers in the U.S. and Europe, where the technology is more widespread, use it in a way that some may consider more intrusive: “ … telematics is being used … in other countries to adjust rates upwards as well as downwards, to monitor accidents, to contribute to claims adjustment, and to deny coverage,” the report says.
“Insurers are saying that this will allow us to gather personalized at the level of: every time you accelerate, every time you turn, the average speed you drive and how that changes during the day,” McPhail explains. “Braking. The times of day you drive, the distance you drive, how often you’re in your car, all of those things, personalized to the level of the vehicle. They’re increasingly trying to personalize it to the level of the individual.”
(A British telematics company recently raised the prospect of charging motorists more for driving in bad weather, by cross-referencing weather reports with information from the boxes.)
“In Quebec, they are allowed to use UBI for things like increasing rates if your driving behaviour is considered to be more risky – consumers can be penalized,” McPhail explains.
In an unpublished paper released in part to Global News, McPhail raises the prospect of “… UBI mov(ing) from a voluntary program to a mandatory one, either officially mandatory or made the de-facto necessity through prohibitive pricing strategies.”
The paper also raises the prospect of non-participants seeing higher insurance rates as higher-quality data from the UBI program makes its way into insurers’ calculations.
“(It) will be more difficult for consumers to see the link back to the UBI program’s use of what was originally personal behavioural information, but will have significant personal consequences for many as their insurance costs rise.”
(This dynamic seems to be happening in Britain.)
One danger in the future is algorithms that draw conclusions about driver behaviour from context. What if an algorithm looked for drivers whose driving was clumsy late on Friday or Saturday nights, compared to their usual driving? It could be alcohol, but then again it could be fatigue or illness. But there’s a potential for a driver to face the insurance consequences of an impaired driving conviction, without the disciplined fairness of a real courtroom.
“They’re absolutely plausible things. There’s a very serious potential for decisions to be made about people that are completely non-transparent.”
“The danger with anything that’s calculated by algorithm is that there’s no judgement. It’s a one-size-fits-all-thing. The assumptions of the humans that designed the algorithm are built into that system. ”
Insurers want to measure risk. But it’s hard to track a car, and its driver’s behaviour behind the wheel, without also tracking a great deal about the details of the driver’s life.
“A car is a really personal place,” McPhail says. “When we think about privacy, one of the things we think about is the right to be left alone in our personal spaces.”
“We spend a lot of time in our cars, and we use them to do things that are profoundly personal. We drive our kids places, we go to our medical appointments in our cars, we have a lover and we’re going to drive to that dingy motel to meet them.”