Telematics Insurance is facing a fever over data privacy

In the world of car insurance discounts, the biggest savings are linked to telematics.

State Farm’s Drive Safe & Save promises up to 30% car insurance premiums for safe driving. Progressive said it “distributed more than $1.2 billion in discounts” through its snapshot. AllState no longer promotes the average or largest discount on its website, but in the past it claimed that discounts from the Drivewise Telematics program could be a total of 40%.

However, for many drivers, data privacy concerns are a major deterrent. Before drivers can win telematics discounts, they must participate in a program that allows insurers to collect huge amounts of personal data, including geographical data.

In recent months, these privacy concerns have reached state lawmakers, lawyers and attorneys, and litigation and proposed laws have emerged nationwide in patchwork attempts to regulate how insurance companies use client telematics data.

Why state officials are cracking down on insurance telematics

First, it was Texas. In January, Texas Attorney General Ken Paxton sued Allstate and its telematics partner Arity, alleging that the companies conspired to collect and sell telematics data from more than 45 million Americans. Illinois attorney filed a lawsuit in February, filing a class action lawsuit against Allstate in federal court.

Automakers collecting telematics data via in-vehicle technology are also under attack due to data sharing partnerships with insurance companies. In April, Texas attorneys filed a class action lawsuit against Progressive and Toyota to share their driving data without consent.

In the meantime, lawmakers from several US states have introduced new laws that will limit the way insurance companies collect and use customer data for telematics purposes. Lawmakers from Maryland, Missouri, New York, North Carolina and Tennessee have introduced legislation focusing on transparency and consumer protection.

• Maryland Senate Bill 984: Insurance companies require that you disclose any data collected for telematics purposes.
• Missouri House Building 1121: Insurance companies are prohibited from purchasing driving data from third parties such as manufacturers.
• New York Senate Bill 5486: Insurance companies require that you submit a methodology used to calculate telematics discounts with your supervisor and make them public.
• North Carolina House Building 81: Written notice and consent from the policyholder are required.
• Tennessee Senate Bill 195: Requests that the insurer obtain consent from the policyholder and discloses how telematics data is collected and used.

Of these five bills, only North Carolina’s HB 81 finds great momentum for progress. The rest were either stagnant in the committee or were completely withdrawn by lawmakers who introduced them.

More states are passing data privacy laws, but may not protect telematics users

The burst of litigation and law over telematics privacy emerges from states’ efforts to regulate data privacy in an increasingly online world.

Data privacy has been a hot topic on the state capitol recently, with 19 states passing comprehensive data privacy laws since 2018. Most of them have been within the last two years. California kicked it out in 2018 with the California Consumer Privacy Act (CCPA), with 18 states continuing.

With so many states passing data privacy laws over the past few years, it is not unreasonable to assume that other states will follow.

According to Kara Williams, a law fellow at the Electronic Privacy Information Center (EPIC), there is only one problem. Most of the data privacy laws these states have been created are not that many. In recent reviews of all 19 laws implemented by Williams and her epic colleagues, most received “D” or “F” grades.

The problem with these privacy policy is that they limit consumers’ control over their data. “Essentially you have to accept the terms or do not do what you’re trying to do.” In this case, it means choosing to sign control of your personal data or give up on what is the biggest discount opportunity available.

Even states with relatively robust data privacy laws may not be able to adequately protect consumers when using insurance. Williams and her colleagues gave Maryland’s newly handed online data privacy laws a generous “B-“; The bill includes certain exemptions for insurance companies, allowing customer data to be used when necessary without complying with new provisions in the law.

Minimizing Data: Key to Trustworthy Privacy Law?

One issue regarding the current way privacy laws operate is that consumers need to control their data privacy. While it may sound good to be responsible for the consumer, what actually means is that it takes a lot of research to ensure that your data is being used comfortably.

If you’ve ever scrolled to the bottom of a long usage scale page to continue your day by clicking “Agree” then you’re probably familiar with this dilemma. Technically, you were given the opportunity to be notified and agree to (or opt-out) data collection, but in reality, most consumers may not have really made an informed decision. A privacy framework that allows businesses to collect large amounts of data and place consumers on privacy liability means that many of us are flying blindly about data privacy.

Epic analysts believe the partial answer to this dilemma is legislation that emphasizes data minimization. In other words, it is a limit on the amount of data a company can collect in the first place. “We advocate for a data minimization framework to ensure that we are dealing with responsibility responsibly in order to hold the company accountable,” Williams says. By reducing that pool to only the data that really needs to deliver the services customers are looking for, minimizing data can make transparency more meaningful and have a more impact on privacy laws.

What does this mean for most of the country?

The wheels of progress are fiercely stirring up about data privacy issues, but most Americans remain where they started, with little autonomy in the telematics process. If your state has not passed telematics data privacy laws or regulations, or if those protections exclude an insurance company, you may be stuck in choosing to trust the insurance company to use it responsibly or give up on the opportunity to qualify for a lower premium.

EPIC’s 2025 Privacy Report shows that six states (Arkansas, Idaho, Kansas, Nevada, North Dakota and Wyoming) have never considered the data privacy bill. 25 people are considering this type of law, but have not passed it yet.

New England may be the next region to monitor strong protections for consumer data. Maine, Massachusetts and Vermont are all working on comprehensive data privacy laws this year. However, it remains to be seen whether these laws will be passed and whether they will provide meaningful protection to customer data in the insurance area.

In the meantime, it is important to understand the data privacy laws (or lack thereof) that govern how insurers operate telematics programs in your state. If you are on the fence about enrolling in a usage-based insurance program, consider following steps:

• Read our privacy policy carefully: Insurers should provide privacy statements on their website or app, along with how they use and use the data they collect through telematics. Taking time to read the privacy policies offered by insurance companies will help you make an informed decision about getting insurance based on usage.
• Know your rights: Depending on state law, you may have the right to access, modify or delete any personal information collected by your insurance company. Or you may not have these rights.
• Ask: Agents may not have answers to all usage-based insurance questions, but insurers may have dedicated support teams for telematics programs that will help you understand your contract with the insurer.
• Check out the telematics practices of car manufacturers. Even if you choose not to opt for an insurance company’s telematics program, lawsuits against Progressive and Toyota show that some insurers can obtain your driving data through partnerships with the manufacturer of your vehicle. Understanding telematics systems within the vehicle and how the automaker in question uses them can help protect your data.
• Compare the costs and benefits of telematics: Despite concerns about data privacy, telematics can be a powerful tool for safe drivers to lower premiums. Especially when the fees are currently high due to driving factors such as age or credit. Savings can outweigh the discomfort associated with the privacy risks of participating in these programs.

Is telematics promises still worth fighting?

Privacy concerns may remain an issue for insurance consumers in many states, but telematics still retains strong incentives that are not the majority of other insurance discounts.

Traditionally, insurance companies have pricing based on car reports from DMVs, geographic crash data from law enforcement, and car reports: car reports from demographic safety statistics drawn from organizations like the National Highway Traffic Safety Administration. This pricing model allows you to assign premiums based on the group you belong to. For example, young drivers are convicted speeders who are resident of Zip Code 33101 and the average risks that those groups carry.

The approach to auto insurance means there are surprisingly few ways to change insurance costs to policyholders.

“For most people, the only way to reduce insurance costs is to shop, reduce coverage, and that’s not to actually reduce risk,” said Ryan McMahon, Senior Vice President of Strategy for Cambridge Mobile Telematics, the world’s largest telematics service provider. “Telematics offers something different.”