Usage-Based Car Insurance Can Save You Money, but It Puts Your Data Privacy at Risk
Car insurance companies can now adjust your policy rate by tracking how fast you drive, braking, phone use, and more with telematics
There’s a good chance that if you own a car, your insurance bills have climbed in recent years. The average cost of a full-coverage car insurance policy rose 12 percent over just the past year, according to Bankrate. While that reflects a slowdown from the 14 percent increase between 2023 and 2024, increases in parts prices from automotive tariffs will likely contribute to rising insurance rates in the near future. When cars become pricier to fix, the insurance policies that pay to fix them get more expensive.
Fortunately, there are plenty of ways to save money on car insurance, from increasing your deductible and maintaining good credit to enrolling in a defensive driving course every few years.
Another way you could potentially save a lot of money on your insurance is to enroll in your insurer’s driver monitoring program.
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Why Rates Are So High
Car insurance premiums are higher across the board, but vary widely from state to state. Floridians, for example, pay nearly $4,000 per year for car insurance, while Vermonters pay less than $1,500, per Bankrate. Rates have risen more quickly in places where natural disasters such as flooding and wildfires have damaged large numbers of cars.
The reasons behind the steady rise in rates over the past few years are straightforward. New cars, costing roughly $50,000 on average, are expensive to buy and replace. Prices for the parts, supplies, and labor needed to repair cars that have been damaged in a crash are also higher. Although motor vehicle collisions were slightly lower last year than the previous year, the number of crashes remains stubbornly high, adding to the amount of money the insurance industry has to shell out for claims every year. Those costs are passed on to consumers.
What to Know About Driver Monitoring
Most people don’t even know whether their insurer offers a telematics discount. Among the 40,566 American policyholders surveyed by Consumer Reports in 2024, only 28 percent knew about their current insurance company’s driver monitoring program. Half of those in the know hadn’t used telematics, 31 percent of them were currently using it, and 19 percent had used it, but called it quits for various reasons. Overall, only 14 percent of the policyholders surveyed had used telematics with their current insurer.
Many insurance companies offer driver monitoring programs—along with a potentially healthy discount on premiums—but the specific information that’s collected, how it’s collected, how much money you can save, and whether or not your driving data can be sold to a third party varies by company, as well as from state to state. (Each state has its own laws governing insurance and data privacy.)
“For consumers who want to save money by enrolling in their insurer’s telematics program, we urge them to do their research and make sure they are comfortable with the program before signing up,” says DeLong.
How Much You Can Save
In CR’s survey, the median annual savings from using telematics among all telematics users was $120. Those with younger drivers on their policy saved the most money on their annual premium—a median savings of $245. Younger drivers fared better in general; the median savings for drivers under 45 was $145. Median savings were $102 for the 45-59 age bracket, $115 for the 60-69 group, and $93 for those 70 and older. People with three or more drivers on their policy also fared slightly better. CR’s survey found that the median annual savings among Black ($186) and Latino ($174) policyholders were bigger than the median savings for white ($98) and Asian ($109) policyholders after signing up for driver monitoring.
Insurers often offer big discounts, but DeLong points out that, on average, most people won’t see the full discount. For example, Geico’s DriveEasy—a mobile app that records braking force, time of day, miles driven, and phone use while driving—promises potential savings of up to 25 percent. The CFA has found that a more typical discount with this program is about 10 percent. He also said to make sure that the only potential penalties for “bad driving” will be a lower discount or none at all. Some companies (not all) will actually raise your rate.
As for the maximum discounts offered, the CFA found that they vary widely between insurers. Of the major companies that offer telematics, Allstate offers up to a 40 percent discount, American Family up to a 20 percent discount; Farmers up to a 15 percent discount; Geico up to a 25 percent discount; Liberty Mutual up to a 30 percent discount; Nationwide up to a 40 percent discount; Progressive a $231 discount, on average; State Farm up to a 30 percent discount; Travelers up to a 30 percent discount; and USAA up to a 30 percent discount. Some companies—including Allstate, Farmers, Liberty Mutual, and Nationwide, among others—also offer a 5 or 10 percent discount just for signing up for their telematics program. It typically takes a few months for a telematics-based discount to kick in, because the insurer needs to have sufficient data to calculate an accurate risk profile.
“There’s little data on average discounts, but they’re substantially lower than the maximums,” says DeLong, noting the difference between the full discount an insurer uses to entice customers to sign up for its telematics program and the actual discount most people see after being monitored for a while.
Scott Holeman, a spokesperson for the Insurance Information Institute (III), says that if your insurer uses a smartphone app to collect driving data, it’s up to you to make sure the app isn’t collecting data while someone else is at the wheel. (Some insurers, such as USAA, make it easy to make corrections regarding who is actually driving through the app.) Your discount may also be based on your annual mileage and other factors. He says the biggest discounts go to low-mileage drivers who avoid rush hour traffic and driving at night, practices insurance companies consider riskier.
Privacy Concerns
Before signing up for a telematics program (or any program that collects your personal data), John Davisson, senior counsel and director of litigation at the Electronic Privacy Information Center, suggests looking closely at your insurer’s website to learn which data points the company collects and how that data is used. He also recommends calling the insurer to ask specific questions (more on that below). Considering the impenetrability of the legal text in most data privacy agreements, he says it’s likely you’ll need to call for clarification.
“I’m a privacy attorney who looks at these policies all the time, and oftentimes even I have a fuzzy understanding of what’s in these documents,” he said. “What you want to find out is that the company collecting the data is taking as little of it as possible in order to provide a service. That’s as true of an insurance company as it is of any company that uses your data.”
If an insurer collects location data, for example, sensitive information about your driving routes and habits can become available to other parties if there’s a data breach, or if your insurer’s privacy agreement contains confusing language that allows the company to sell that data without your knowledge.
“Companies can say they’re not selling your data, but use weaselly language that hides the fact that the data has been ‘de-identified’, or stripped of personal information, and sold anyway,” says Davisson. “But that de-identified data can later be matched with other commercially available data about you and ‘re-indentified.’”
Most companies that collect data, he says, are aware of this, which is why even de-identified data is valuable to them. Both Davisson and DeLong brought up as an example a recent scandal in which General Motors sold its customers’ driving data to risk-profiling companies through its OnStar connected-vehicle subscriptions, a move that left some people having to shell out more for insurance or having their policies canceled altogether.
“There is always a risk that your data could be siphoned off and made available to other companies, and we see such a steady drumbeat of stories about data breaches,” Davisson says.
Sometimes, the use of data can result in discriminatory rate hikes, says DeLong. According to the CFA, lower-income workers who work night shifts and have no control over their work schedules are more likely to be penalized in this way, a phenomenon that often impacts Black and Latino consumers. Data about the neighborhood you live in and where you drive can also be used against you.
“You might be as good a driver as someone the next town over, but if the insurer’s risk model assigns you to a higher risk category based on where you live, the difference in insurance premiums could be unfair,” says Davisson.
Most of the telematics programs the CFA analyzed took into account braking, the time of day, and number of miles driven. Some (including those from Allstate, Geico, and USAA) also collected and analyzed location information. There’s also a host of other data they can collect, including weather patterns and vehicle performance. Liberty Mutual, for example, states on its website that its RightTrack program collects information from the onboard vehicle diagnostic system, including fuel consumption and use of assistive driving technologies like adaptive cruise control and lane keeping assistance.
“The reality is that it is very hard for consumers to have much control over their personal data,” says Davisson. “Unfortunately, government regulations haven’t caught up with data privacy concerns, and consumers are paying for it.”
Bearing in mind all the risks that exist, should you even bother signing up for a telematics program? For some, the potential savings as insurance rates continue to climb will undoubtedly prove compelling, despite the trade-offs and potential exposure to a data breach.
“Consumers should be aware that this is not a risk-free arrangement, and that there are real impacts that could come back to haunt you later if a third party gets access to your data,” says Davisson.
What to Do if You Want the Telematics Discount
If you feel confident that the benefits of a telematics program outweigh the potential risks, Davisson recommends asking the insurer a number of questions before signing up. (Bear in mind that the answers to many of these questions will vary based not only on the individual insurer, but on state law where you live.)
- What information is being collected? Is sensitive location and route data included?
- What kind of device collects the information?
- Can the insurer differentiate between different drivers, or make it easy to inform the insurer when someone who’s not on the policy is driving?
- How is the data processed? What factors are weighed for or against you as the insurer calculates rates?
- Could your rate potentially go up if the program identifies risky behavior, or is your discount the only thing impacted?
- How long will the data be retained?
- What opportunities exist for appeal if you’re not happy with how your driving has been analyzed? Will you be stuck with the rates the insurer comes up with based on the data collected by the telematics program, or will everything “reset” if or when you opt out?
- Will the insurer sell your data, or otherwise make your data available to third parties? And if not, will they still sell a “de-identified” version of your data?
“Before you get to all these questions, or even after you’ve had them answered, you still may want to step back and ask yourself if the trade-offs are worth it,” says Davisson.
More on Car Insurance
• CR’s Car Insurance Ratings and Buying Guide
• Best Car Insurance Companies
• How to Lower Your Car Insurance Rates
• Best Car Insurance Companies for Seniors
• Everything You Need to Know About Teen Car Insurance
• Proven Ways to Save on Car Insurance Even If You’re a Safe Driver
• How to Keep Your Car From Getting Stolen
• How to Prevent Catalytic Converter Theft
