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Allstate wants to track driving and determine car insurance premiums

Many consumers are dissatisfied with the use of credit history by car insurers to set premium rates. Currently, alternatives are emerging. Some people may not like it even more. Insurance companies can track how, when, and where they drive.

From late summer, car insurance company Allstate Ltd

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The company and regulators will lead industry-wide transition efforts over the next few years, from sizing applicants’ risk due to factors such as credit scores to using telematics primarily to determine pricing. He said he was in talks with state regulators.

In telematics, insurers monitor policyholders’ driving behavior either through smartphone applications or devices built into the vehicle. The insurance company slices the tracking data and adjusts the individual charges.

Switching can be anxious for many people who are concerned about privacy, but it can be cheaper for good drivers or vehicle owners who drive less.

Allstate is a leading distributor of policies that use telematics in combination with credit scores and other traditional pricing factors, and has a unit, Arity, that sells telematics services to other insurance companies.

In an interview, Allstate Chief Legal Officer Ronda Ferguson said, “We have the opportunity to drive innovation in the insurance industry. We want to start a dialogue with regulators and think about how to step into this. I think. “

“Getting there requires industry-wide cooperation. Legislators and regulators create clear and consistent rules for driving-based assessment plans, so insurers and customers who use them to drive telematics programs. Until, “Ferguson added.

Allstate’s telematics advocacy is the latest development in state insurance regulators’ commitment from last year to scrutinize existing practices to identify practices that could put minorities at a disadvantage. The use of credit scores by car insurers is one of the concerns.

Most states allow insurers to use credit-based elements, but this practice is low-income and many minorities because consumer groups are overvalued in the low credit score category. Has long claimed to be unfair to consumers.

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The Biden administration is also scrutinizing the pricing methods of auto insurance companies.

In the traditional pricing approach, insurers group applicants into actuarial categories by characteristics such as age, gender, marriage status, vehicle type, and driving records, in addition to credit behavior. Many also use education and professions, which are also accused of being unfair to certain consumer groups. Actuaries have a hard time explaining why credit factors work to predict billing activity, and it is speculated that people with good credit habits take great care to act cautiously.

While Allstate supports the current approach of actuarial soundness, “sophistication, accuracy and fairness,” telematics offers the opportunity to “improve the accuracy of insurance prices.”

An all-state spokesman said in the transition to telematics, insurers do not speculate on how much any of the traditional factors will diminish in use.

This technology has grown steadily since it was introduced by Progressive. Ltd

About 20 years ago. However, according to industry groups, less than half of new car insurance applicants register when given the opportunity.

Currently, over 2 million of Allstate’s approximately 22 million auto policyholders are registered. The National Association of Mutual Insurance Companies estimates that they are the majority of the approximately 8 million people in the industry as a whole who own telematics-connected cars, and 4 of the more than 210 million individual car policyholders in the United States. Less than%.

Telematic devices track actions such as sudden braking and speeding, as well as total travel time, location, and mileage. Some programs also measure inattentive driving.

The details influence why Allstate’s proposals aren’t selling well. “There are many’ifs’,” said Pennsylvania Insurance Commissioner Jessica Altman, including the potential need for a state legislature to ban the use of factors such as credit.

She says many people are hesitant to try telematics because of data concerns and inertia, and some call it “Big Brother.” In favor of telematics, widespread data collection is “becoming more and more standard for consumers,” she said.

“What insurers can do with this telematics data will require very strong consumer protection … The data created will be owned by the driver,” said Jim Donelon, Louisiana Insurance Commissioner. Or is it an insurance company? “

Another concern is whether telematics’ ability to focus on location “may cause new problems” in certain areas, such as “redlining” cars to drive or park and District of Columbia Insurance. Commissioner Karima Woods said.

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Write to Leslie Scism at leslie.scism@wsj.com

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Allstate wants to track driving and determine car insurance premiums

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