When GPS and auto-insurance collide

Ars Technica had a nice piece about some California legislation that will soon require 100% of auto insurance policies to be of the, "pay as you drive," sort where your rate varies depends on miles driven. The problem is how do the insurance companies track this. There are two methods: the driver reports the miles driven (rife with fraud), or use a tracking device of some kind (rife with privacy problems). You can guess which way the EFF desires, and which way the insurance companies desire.

As it happens, I touched briefly on this back in October 2007:

The first area I predict to really come into play will be from insurance companies. Actuaries would LOVE the detailed information provided by a GPS location log and road data. Cross reference the two and you have all sorts of goodies:

• What percentage of the time does the driver exceed the posted speed-limits?
• How often is the car parked in high vehicular crime areas?
• How many miles per day/week/month/year does the car get driven?
• When the car gets driven outside of 'normal', such as driving to Grandma's.

As it happens, this is exactly what the EFF is worried about. All of these have an effect on the risk environment of a particular vehicle, and that should have a corresponding effect on the insurance rate. On the other hand, it does give a precise location trail of everywhere that vehicle goes, something that police and divorce-courts would be very interested in. The EFF wants legislation in place to restrict data collected to just miles driven.

Indeed, from the EFF link:

There is real danger that this information would not only be used to ascertain the political or associational affiliations of drivers, but also to charge more if you drive and park in neighborhoods with high vehicle theft and crime rates, to impose higher premiums for people who drive at night or to link your health insurance rates with location data that reveals your lunchtime trips to McDonald's.

Seeing that text about parking in dodgy neighborhoods is a bit spooky for me when I look back at my 2007 post, but it is a very valid concern.

As I've mentioned before (July 2004) Big Brother, Inc. is more of a concern than BigBrother.gov in the US. This is a classic example of that. The insurance industry already had these pay-as-you-drive policies on the books, and it was the State of California that set a must-carry bar for these without defining what the tracking mechanism was.

This will be an interesting debate to follow!