Your chipper TV friend Flo, otherwise known as Progressive's ubiquitous shill, wants you to be excited -- very excited. As you've probably learned from her gratingly effervescent commercials, she and her Big Brothers in the insurance biz want you to see the latest Orwellian scheme not as a privacy-destroying step to justify raising your government-mandated car insurance premiums. Instead, she wants you to see her "patented, proprietary" device "from the future" as a great innovation aimed at saving you money.
And yet, as the federal government this week takes a big step toward possibly mandating "black boxes" for new cars, and as more car firms like Progressive pressure you (and potentially soon require you) to put tracking bugs in your vehicle, serious questions are now swirling around so-called "telematics-based insurance" -- questions that Flo doesn't want you to ask. She purports to have all the answers, shrouding this complex surveillance system in her squeaky voice, wide smile and promises of car-insurance utopia -- almost as if she were deliberately parodying the saccharine avatar of an autocratic mega-corporation in a dystopian sci-fi flick. But despite the TV ad barrage, the questions nonetheless persist because the tracking system is both so invasive and so arbitrary.
To appreciate that disturbing reality, consider this FoxNews.com dispatch about how the system works:
Richard Hutchinson, the usage-based insurance manager at Progressive, says the SnapShot works on algorithms that use your driving style to predict how likely you are to have an accident, and how expensive it will be if it happens. Normal insurance plans use dozens of set variables like age and gender to calculate rates, but the SnapShot taps into literally thousands of dynamic inputs including how fast and what time of day you drive. The device captures data in one-second intervals. One of the most revealing stats: how much you brake and how often. Over-braking is a key indicator of an accident-prone driver...
In the end, (Thilo Koslowski, an automotive analyst with Gartner) says the major hurdle is the Big Brother effect. While (the system) might seem innocuous, once there’s a way to capture how you drive and transmit the results to a home base, the next step could be to monitor your daily commuting route and force you to take a different, theoretically safer, way.
If this seems eerily familiar, that's because it follows earlier evidence that the 2002 film "Minority Report" was less fantasy than spot-on prophecy. In that film, humans have developed technology to fight "pre-crime" -- that is, to stop crimes before they occur, and punish people as criminals for allegedly preparing to commit said crimes.
"Telematics-based insurance" is simply the insurance-industry realization of that technology -- a technology that can punitively charge you higher rates for embracing driving styles and geographic routes that supposedly mean you are about to incur collision costs, even if you haven't actually incurred said costs yet, and even if you never will incur said costs in the future. Essentially, the insurance firms are combining data from the past with real-time data from your car to presuppose that if you brake in a certain style, commute on a certain road, or drive in other myriad ways deemed "risky" but legal, there's a higher chance that you will get into an automobile accident. So rather than charge you a higher premium after you incur those accident costs, the companies are looking to punitively charge you beforehand à la a Department of Pre-crime.
What's wrong with such a system? The assumptions baked into the algorithms, that's what. Yes, your particular braking method may be idiosyncratic, and actuarially, that may indeed suggest you are more likely to crash at some point. But citing generalized odds to assume that you in particular will definitely crash in the future -- and to then act on that assumption by charging you higher premiums in the present -- is both illogical and predatory, forcing you to pay for accidents you haven't yet been involved in, or may never be involved in in the first place.
Of course, Flo and other insurance-industry spokespeople like her insist that the system today only exists to give customers premium discounts for "good" driving (however arbitrary that definition of "good" is), but not to raise premiums for "bad" driving. However, if and when the devices become a prerequisite for insurance -- which many experts say will soon happen -- we would likely see a system in which the "standard" premium is inflated, and the "discounts" for "good" driving only slightly reduce premiums. That is, we would likely see a system in which the technology stealthily raises overall premiums for everyone.
What can be done about all this? Fox reports that some states "currently have specific mandates that prevent insurance companies from requiring" the tracking devices. That's a good first step, but the regulation is easy for the industry to get around with punitive pricing schemes -- the kind that will hold a proverbial gun to the consumer's head and make the devices a de facto obligation.
No, the only real protection is for states to ban insurers from using these devices to charge higher premiums. It's a rather simple legislative initiative; a state could simply say that a licensed insurer cannot raise a customer's premium unless that customer incurs a financial outlay by the insurance company (say, via a collision).
Insurers will no doubt say that's an unacceptable government intervention into the "free market." But, then, so too is the government requirement that all drivers buy the car insurance industry's products. And if states are going to use statutory power to force people to be the insurance industry's customers, which is a huge financial boon to insurance companies, then in exchange it's more than fair to require those companies to adhere to some basic consumer-protection rules.
Without such rules, Flo or another one of her Big Brothers will probably soon be in your car -- whether you like it or not.