- Where Insurance & Technology Meet

Is Usage Based Insurance a Pathway to Greater Privacy, Not Less?

As industry interest in Usage-Based Insurance (UBI) grows, familiar concerns with respect to privacy surface with each launch of new UBI products. It is all but guaranteed that the “Big Brother” aspect of it will garner some significant portion of the media’s focus when they report on it.  It all might seem pretty ominous for the consumer, what with scandals involving governments recording telephone conversations and stories about social media sites leaking personal information. But this doesn’t have to be the narrative.

UBI can buck the trend.  Rather than being more invasive, it can actually be used to enhance personal privacy for policyholders. The reason is quite simple. Insurers may become largely indifferent to who is driving a car by using driving data to shift the focus to how it is being driven.

We Can Change the Story from “Big Brother is Watching” ….

In Canada, Industrial Alliance’s Mobiliz is already moving the boundaries by declining to ask applicants to divulge their claims history and even ignoring claims made under the policy. The amount of personal information collected to initiate a UBI policy could be reduced to little more than whatever is needed to render a bill. Information gathered today and used as proxies for actual driving behaviour or usage would no longer be required.

To date, the industry has probably benefited from the increased awareness of UBI that the “Big Brother” meme has fostered. Now is the time to craft a new story. Unwelcome and unfounded privacy concerns will only hamper adoption and acceptance of UBI and inhibit the delivery of the meaningful benefits it can provide. Instead, the key stakeholders, i.e., policyholders, regulators and insurers should collaborate on the development of a strong privacy framework that defines what data can be collected, how it can be used, and who can use it. Enhanced privacy could become an important selling point for UBI.

Some Guiding Principles ….

Here are some suggested guiding principles (by no means an exhaustive list) that could serve as a useful starting point:

  1. Only aggregate data may be shared with third parties except in the case of a criminal investigation;
  2. Individual data records must be stripped of all personal identifiers;
  3. Notification of what data will be shared and the purpose of its proposed use must be provided in advance to policyholders (policyholders could grant permission for specified uses when they initially sign up for UBI);
  4. Individual policyholders are entitled to a fair share of any compensation paid for access to their aggregated data (in effect, this may be a symbolic gesture, but nonetheless an important principle).

Advances in technology don’t have to result in a further erosion of privacy. The insurance industry has a unique opportunity as it deploys UBI to be on the vanguard of both technology and enhanced privacy. As an industry that so often struggles to curry favour from the buying public, this is an opportunity that it should make every effort to seize.

For More Information ….

Corner Two Consulting has published a white paper, Ms. X in Freedom Plaza, Is Usage Based Insurance a Pathway to Greater Privacy, Not Less?  In addition, the Insurance 2023 Forum on October 3, 2013 will feature a presentation on automotive technology (including UBI) and the consumer as well as an in-depth discussion on trends in consumer communication.

What Do You Think?

Can the industry change the narrative on UBI?  Let us know how you would approach this.


Colin Wright is a proponent of UBI and Principal of Corner Two Consulting, which focuses on UBI preparedness. Colin has extensive experience in financial services, including managing business analytics units for two leading insurers and managing Aviva Canada’s Autograph UBI pilot from 2008 to 2010. He holds an MBA from York University’s Schulich School of Business.