Pay As You Drive Auto Insurance: Be Afraid, Be Very Afraid

Please welcome the latest invasion of our privacy. It’s called Pay As You Drive (PAYD) auto insurance. The concept is a simple one: a customer’s premium is tailored to his/her driving habits. This includes the number of miles driven, and also often includes the style (i.e. speed and acceleration) and time of driving. Many insurance carriers allow their customers to voluntarily select a PAYD plan. For example, Progressive offers the “My Rate” Program, and the company’s website boasts that “[i]f you’re a safe and/or occasional driver, you could pay less for auto insurance- a lot less!” In return for the discounted auto insurance, however, customers sacrifice their privacy. GPS tracking devices are installed to register customers’ driving habits. Is a better rate on auto insurance really worth sacrificing the constitutionally protected right to privacy?

Although programs like Progressive’s “My Rate” are cause for concern (especially in this harsh economic climate where we’re all trying to save a buck), proposed legislation in California downright scares me. The proposal allows an insurer to offer self-reported estimated mileage plans (“EM”) and/or actual-mileage driven plans (“AMD”). An insurer may exclusively offer AMD plans, and, may, in turn, mandate the installation of GPS tracking devices. Insurance companies understandably wish to attain the most information possible so as to accurately measure a policyholder's risk. But, with increased technology, the question becomes how much is too much? We don’t want insurance companies knowing every detail of our personal life, no matter how helpful it may be for calculating risk.

There are not any direct constitutional issues, as the constitution obviously does not limit private companies and individuals. However, with PAYD, insurers will have access to information such as speed and style of driving (and maybe even location, although supposedly the location of the vehicle will be left out of the data collected), and it is hard to imagine that the government wouldn’t try to get its hands on such information. For example, if the government is prosecuting an individual for vehicular manslaughter, it would likely seek to subpoena the information collected by PAYD insurers--information that would be more readily available than it would generally be.

There are, to be sure, benefits that come along with PAYD auto insurance. At least theoretically, those with PAYD policies will curtail the amount they drive, and, thus, reduce carbon dioxide emissions. However, if the insurance market becomes dominated by AMD plans, our privacy will be seriously jeopardized. Do the potentially lower insurance rates and environmental benefits justify an infringement on our constitutional right to privacy?