"My hunch is that this kind of data driven insurance could help people avoid risky situations." That's the ideal. The cheapest accident to pay for is the one th

"My hunch is that this kind of data driven insurance could help people avoid risky situations." That's the ideal. The cheapest accident to pay for is the one that doesn't happen. It's all about aligning incentives. The win-win dynamic is that the insurer can certify training courses, licensing, product design, etc. Customers can get discounts for making safer choices. Selection effects can be more adversarial. e.g. You get dropped after the first incident. The people who would benefit the most from coverage can't get it. People with poor credit scores get discriminated against even in the absence of activity specific bad history. Obviously as you mentioned perfect discrimination causes the system to break down. Risky customers can't get covered while safe customers don't buy because their risk is infinitesimal.