Growing Pains Ahead For Insurance Telemetrics?

We have noted in the past that one reason telemetrics have been becoming more prevalent in the insurance industry (and are likely to continue doing so for the foreseeable future) is their ability to reduce expenses as a result of more accurate risk assessment. 

Two recent lawsuits, however, highlight a couple of the issues raised by these technologies that are providing insurance companies with the ability to monitor and analyze the performance data of individual policyholders in order to better quantify and even prevent some of the potential negative outcomes that are being insured against.

3 Potential Problems With Telemetrics In The Insurance Industry

• Better Data Won’t Work In Every Customer’s Favor: While theoretically, most policyholders who incorporate telemetric-device-monitoring into their business operations should see a benefit from risk prevention alone and lower premiums as a result, there are some high-risk policyholders whose risk profiles and claims history data may ultimately lead to a higher rate than anticipated.
• Negative Telemetric Data May Be Questioned: Among those policyholders whose telemetric performance is assessed as high-risk and results in higher premiums, some may question the accuracy or integrity of the data produced by the telemetric device. 
• Conflicts of Interest Should Be Avoided: While conflicts of interest between telemetric device creators and the insurance companies incorporating the output of those devices into risk and claims assessment processes should be minimized as a preemptive defense against policyholders who question the accuracy of those data and assessments, that defense alone is insufficient to avoid litigation.

Both of the aforementioned lawsuits at issue involve Tesla drivers who saw their insurance premiums go up in response to data gathered from devices in their cars that assess their driving, including turning behaviors, braking behaviors, and collision warnings. 

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In both cases, drivers are challenging what have been dubbed ‘misleading’ collision warnings that the drivers say do not accurately reflect their operating of the vehicle or their risk of collision and have caused their premiums to go up as a result. 

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The most recent case is a class action suit involving not only data collected by Tesla automobiles, but those cars and their drivers are also insured through Tesla insurance, which has faced some mixed reviews since the service was launched in 2019 and only serves to complicate the matter further as a result of the shadow cast by that potential conflict.

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Going forward, at least for the time being, insurers and policyholders alike would both be wise to consider the implications that the potential alignment of interests among telemetric device makers and insurers may have on the propensity for policyholders to take legal action. 

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All parties involved would also be wise to become thoroughly aware of the sensitivity with which these devices gather data, as well as how various data will affect premium expenses, with as much specificity as possible.

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Then again, it’s possible that questioning the accuracy of data collected by telemetric devices will subside overtime as their usage becomes increasingly commonplace and standard business practice, at which point the choice of whether or not to incorporate telemetric devices into business operations may serve more as a de facto filter between higher and lower risk policyholders. 

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In any case, telemetric devices seem poised to see adoption rates climbing in the near-term at least as these kinds of wrinkles get ironed out, which provides a very real opportunity for forward-looking companies who can blaze this trail, proactively reduce their risk on the front end, and avoid the some of the potential pitfalls as this aspect of the insurance business continues to evolve. 

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You can read more about this topic here.