How’s Your Driving? If You Use an App Insurers Could Be Watching

Apps that let you book a ride to work or borrow a car for your next vacation are feeding into a revolution in auto insurance — while also raising some privacy red flags.

Data on everything from how frequently a car is booked, the type of vehicle rented, the destination, the amount of time between making a reservation and the trip, how hard the driver slams on the brakes to how punctual and friendly a person is on the drive could all be fair game for the industry.

Startups like Turo Inc. and BlaBlaCar believe they can take this information and use it to find new ways to assess risk and create new businesses tied to auto insurance.

“It’s not so much about an individual’s story there, but at an aggregate level across millions of trips, patterns exist that actually predict risk,” Turo’s U.K. head Xavier Collins said in an interview.

The famously staid and risk averse auto insurance industry is slowly finding ways to use new types of data analysis to help it make decisions about who to cover, how much to charge and which customers are most likely to leave for a competitor, said Ingo Blöink, a consultant in Germany who was previously the European director of Daimler Insurance Services.

Sleeping Beauty

A mix of telematics that measure a car’s performance and other publicly available records together with privately garnered “soft data” can be fed into a program to discern patterns. That can create a “microsegment” risk analysis that more finely slices who’s most likely to get into an accident or commit fraud, which could eventually replace most actuaries, Blöink said.

“The industry is a sleeping beauty slowly waking up; they’ve not realized that there’s huge potential,” he said. “It will completely change the way risk will be underwritten in the next 10 years.”

San Francisco-based Turo and France’s already have specialized arrangements with insurers — Allianz SE, Liberty Mutual and Axa SA — that offer tailored products to cover drivers who’ve borrowed another person’s car or used the service to transport someone else in their own car.

The companies are part of a ride-sharing industry, led by the likes of Uber Technologies Inc. and Lyft Inc., that’s challenging traditional car ownership and rentals. Turo’s platform lets users lend personal cars to others. BlaBlaCar arranges carpools between cities.

Privacy Questions

At an aggregate level, this type of data is “definitely something that’s of interest to us and we are exploring,” said Martin Hoff, Allianz Automotive’s head of product management and innovation, noting, however, that it isn’t being used currently. A record of good driving from such companies could help new drivers applying for auto insurance, he said.

Still, sharing data with the insurance industry, which may already have a lot of information about a user, raises privacy issues, said Ioannis Kouvakas, a legal officer at Privacy International, a British charity that lobbies for privacy rights.

It’s difficult to truly anonymize data, and companies could potentially reconstruct identities and use that information in invasive ways. Another big concern is whether customers are aware that they’re sharing data, he said.

“There’s a lot of potential for abuse,” Kouvakas said in an interview, adding that people can rarely ever be sure of how their data is used.

Consent Needed

Allianz’s Hoff said the insurance industry is constrained by regulations on information they can use when assessing applicants, particularly in Europe.

That’s largely thanks to the General Data Protection Regulation legislation that requires companies to inform people when their personal data is being used, letting them opt out or object, said Ian De Freitas, a partner at law firm Farrer & Co. who specializes in privacy law.

But when identifying markers are stripped out and the data become anonymous, it’s no longer considered private, he said.

Turo’s users currently consent to share data that lets the firm determine their likelihood of getting into an accident or making an insurance claim, identify unsafe driving behavior and conduct investigations and risk assessments.

The firm’s privacy policy says that the company might collect aggregate data about its users to consider new features. Customers share their drivers’ license information, reviews, street address, employers, schools and location.

Smarter Insurance

Similarly, BlaBlaCar collects details about cars, biographical information, replies to surveys and reviews, and location.

Last year, BlaBlaCar announced BlaBlaSure, an insurance product with Axa SA that targets ride-sharers. It’s been rolled out in France, with plans to make it Europe-wide, BlaBlaCar Chief Executive Officer Nicolas Brusson said in an interview. Eventually, this product will use data collected from BlaBlaCar users to help determine rates for new customers.

“It seems pretty basic but when you get hundreds of data points from drivers saying a person is a great driver,” Brusson said. “It’s pretty powerful in terms of insurance pricing.”

The company is collecting data and finding correlations between data points such as how someone’s driving is rated by other users, and the number of accidents. Customers must opt in to sharing their data with the insurance product, which is combined with information from other users and anonymized, he said.

Drawing conclusions from the research to sell insurance is a few years off, Brusson said.

“Long term, all these car-insurance products will be smarter because we have lots of data from the community,” he said.

Photo courtesy of Turo.