6 ms·

This has a lot more to do with the risk pooling of insurance and competition among carriers than it does to do with some desire to mindlessly violate privacy.

by rcar 8y ago

This has a lot more to do with the risk pooling of insurance and competition among carriers than it does to do with some desire to mindlessly violate privacy. To give a simplified example, say a good driver costs an average of $100 per year and a bad driver costs $10,000. If without trackers, you can get 100 customers where 10% end up ultimately being bad, the cost over the year ends up being $100 * 90 + $10,000 * 10 = $109,000 or $1,090 per customer. If trackers let you get down to just 8% bad drivers, your expected costs are $100 * 92 + $10,000 * 8 = $89,200 or $892 each. That lowered cost means more competitive rates, which in turn drives positive selection (i.e., good drivers will be more likely to sign up for your service in the first place). Those bad drivers you passed on also aren't just going away - they're going to competitors and driving up their costs.

existencebox 8y ago
Isn't this the purpose of insurance adjustments? When an event occurs that would cost the insurance company money, they change their prior of what you should be paying, no need to try and "pre-crime" with tracking chips. I would rather we not normalize technology that really has no reason to exist but to allow insurance companies to optimize the last meaningless % of their margins at the cost of a slow erosion of an expectation of privacy. (companies who already have a history of doing questionable things to deny claims and avoid liability, enoughso that I have personal stories on this matter)
- epanchin 8y ago
  This is more like advertising your insurance company in women’s magazines to pre filter your customers without offering different prices based on gender. As the insurance company couldn’t determine your driving ability themselves, and therefore offers the same price regardless of ability, the black box allows customers to pre filter themselves before applying, hopefully reducing the average accident rate.
andrewla 8y ago
I think it's clear that they want to use this to minimize expenditures. The problem arises with how they use the data. The trackers don't intrinsically let them get the bad driver rate down, but lets them tune the premiums that those drivers have to pay. Let's use your data; they currently pay ~$1,090 per customer. So for the sake of argument, let's say that they charge $1,100 and keep that $10 in expectation. Now they install GPS trackers, and they can identify two classes of behavior; class A drivers (50% of drivers), who have a 4% accident rate, and class B drivers (50% of drivers), who have a 16% accident rate. The combined rate is still 10%. Class A drivers cost 48 * 1e2 + 2 * 1e4 = $24,800 = $496/driver Class B drivers cost 42 * 1e2 + 8 * 1e4 = $84,200 = $1,684/driver. So this is great -- good drivers pay less, risk profiles are narrowed, etc. Maybe the bad drivers can be given feedback that will tell them what things they can do to minimize their accident rate based on the GPS data, and get some feedback on that -- "drive slower", "stop at red lights", "stop running into parked cars" -- things that both improve the metrics for the GPS and result in safer drivers. But maybe the metric that the adjusters found are "frequently drives in historically Irish neighborhoods", or "drives to fast food restaurants more often". Now things get diciers. And what if the things that the GPS is measuring are not proxies for how bad a driver they are, but how willing they are to settle with cash without involving insurance. Or the correlation is a false one -- it could be that most of the Class B drivers are excellent drivers, as good as Class A, but they have to pay Class B rates because they got lumped in with a secondary association not related to quality of driving. This is a problem with any attempt to bring more metrics to bear in computing insurance rates, but is especially exacerbated by the invasive nature of GPS-based metrics, which can be used as proxies for all sorts of socioeconomic signals that allow open discrimination.
- oh_sigh 8y ago
  The tracker I have doesn't have any kind of location capabilities, and only tracks certain kinds of events like acceleration rates and speed. So basically as long as you keep it under 85mph and don't slam on the brakes or the accelerator frequently, you get the full discount.
  - andrewla 8y ago
    Do you mind saying what kind of device you have? In some cases the only thing preventing other information being used is privacy policies, and the data may be used for gathering metrics to plan future devices. If the data collection is verbose enough, dead reckoning from speed/acceleration information can be used to unmask some non-driving information. It can't be generally unmasked completely, but even small correlations, like "they start slow in the morning but go faster after xx seconds" -> "they live near a freeway" -> <regional information> -> "they are slightly more likely to be rich" -> "they under-report accidents" can be inferred, leading down the same path. This is the sort of thing that I was indicating above -- a lot of "good" drivers can be lumped in with the "bad" ones to make Class B, if you can establish an attributes that appears to be causal but whose accuracy is low.
    - tk75x 8y ago
      It sounds like the one that Progressive used. They would monitor the time of day you drove, your speed, and acceleration/braking. So if you drove fast, late at night, and braked hard constantly, you would not qualify for a discount but at least they didn't raise your rates. And the best (worst?) part was that you only had to have the thing in your car for 1-3 months, I forget which, but when you were done you sent it back and were free to go back to your original driving style.
      - Scoundreller 8y ago
        We could raise gas taxes instead of letting insurance companies capture the profit from punishing inefficient drivers (speeding, not looking ahead and braking instead of easing off accelerator).
Scoundreller 8y ago
As insurance becomes perfect, you’re just paying your actual damages plus a premium to the insurance company. There’s decreasing value to pooling when the risks are perfectly quantified at the customer level.

by rcar 8y ago

existencebox 8y ago

Isn't this the purpose of insurance adjustments? When an event occurs that would cost the insurance company money, they change their prior of what you should be paying, no need to try and "pre-crime" with tracking chips. I would rather we not normalize technology that really has no reason to exist but to allow insurance companies to optimize the last meaningless % of their margins at the cost of a slow erosion of an expectation of privacy. (companies who already have a history of doing questionable things to deny claims and avoid liability, enoughso that I have personal stories on this matter)

epanchin 8y ago
This is more like advertising your insurance company in women’s magazines to pre filter your customers without offering different prices based on gender. As the insurance company couldn’t determine your driving ability themselves, and therefore offers the same price regardless of ability, the black box allows customers to pre filter themselves before applying, hopefully reducing the average accident rate.

andrewla 8y ago

I think it's clear that they want to use this to minimize expenditures. The problem arises with how they use the data. The trackers don't intrinsically let them get the bad driver rate down, but lets them tune the premiums that those drivers have to pay. Let's use your data; they currently pay ~$1,090 per customer. So for the sake of argument, let's say that they charge $1,100 and keep that $10 in expectation. Now they install GPS trackers, and they can identify two classes of behavior; class A drivers (50% of drivers), who have a 4% accident rate, and class B drivers (50% of drivers), who have a 16% accident rate. The combined rate is still 10%. Class A drivers cost 48 * 1e2 + 2 * 1e4 = $24,800 = $496/driver Class B drivers cost 42 * 1e2 + 8 * 1e4 = $84,200 = $1,684/driver. So this is great -- good drivers pay less, risk profiles are narrowed, etc. Maybe the bad drivers can be given feedback that will tell them what things they can do to minimize their accident rate based on the GPS data, and get some feedback on that -- "drive slower", "stop at red lights", "stop running into parked cars" -- things that both improve the metrics for the GPS and result in safer drivers. But maybe the metric that the adjusters found are "frequently drives in historically Irish neighborhoods", or "drives to fast food restaurants more often". Now things get diciers. And what if the things that the GPS is measuring are not proxies for how bad a driver they are, but how willing they are to settle with cash without involving insurance. Or the correlation is a false one -- it could be that most of the Class B drivers are excellent drivers, as good as Class A, but they have to pay Class B rates because they got lumped in with a secondary association not related to quality of driving. This is a problem with any attempt to bring more metrics to bear in computing insurance rates, but is especially exacerbated by the invasive nature of GPS-based metrics, which can be used as proxies for all sorts of socioeconomic signals that allow open discrimination.

oh_sigh 8y ago
The tracker I have doesn't have any kind of location capabilities, and only tracks certain kinds of events like acceleration rates and speed. So basically as long as you keep it under 85mph and don't slam on the brakes or the accelerator frequently, you get the full discount.
- andrewla 8y ago
  Do you mind saying what kind of device you have? In some cases the only thing preventing other information being used is privacy policies, and the data may be used for gathering metrics to plan future devices. If the data collection is verbose enough, dead reckoning from speed/acceleration information can be used to unmask some non-driving information. It can't be generally unmasked completely, but even small correlations, like "they start slow in the morning but go faster after xx seconds" -> "they live near a freeway" -> <regional information> -> "they are slightly more likely to be rich" -> "they under-report accidents" can be inferred, leading down the same path. This is the sort of thing that I was indicating above -- a lot of "good" drivers can be lumped in with the "bad" ones to make Class B, if you can establish an attributes that appears to be causal but whose accuracy is low.
  - tk75x 8y ago
    It sounds like the one that Progressive used. They would monitor the time of day you drove, your speed, and acceleration/braking. So if you drove fast, late at night, and braked hard constantly, you would not qualify for a discount but at least they didn't raise your rates. And the best (worst?) part was that you only had to have the thing in your car for 1-3 months, I forget which, but when you were done you sent it back and were free to go back to your original driving style.
    - Scoundreller 8y ago
      We could raise gas taxes instead of letting insurance companies capture the profit from punishing inefficient drivers (speeding, not looking ahead and braking instead of easing off accelerator).

Scoundreller 8y ago

As insurance becomes perfect, you’re just paying your actual damages plus a premium to the insurance company. There’s decreasing value to pooling when the risks are perfectly quantified at the customer level.