Ingenie, a UK-based car insurance company, has what they hope is a big innovation. They put a black box in your car with a GPS and a SIM card to transmit data. The technology records data on cornering, braking, acceleration, and speeding. If the algorithm used to mesh all this together says you are driving better, your rates go down every four months!
Even better, you get instant feedback on your cell phone about the quality of your driving and suggestions for improvement. “Drive well, pay less,” is a good slogan.
Of course, you give up the privacy of where you’ve been and how you got there.
The product is geared for new drivers, aged 17-25 only. Here why I think works: this age group has a large share of notoriously bad drivers, both because of inexperience and because of lack of self-control.
How is an insurance company supposed to price these customers? Well, here’s the trick: allow for self-selection. Kids that are willing to put the black box in their car are signaling that they have nothing to hide about their driving habits. So this plan will attract a safer group of young drivers than would a random selection.
Second, the product itself will hopefully make safe drivers even safer. By providing rapid feedback between behavior and outcomes, like we are little lab rats, we will respond. There is also something here of virtue ethics because the computer program is teaching prudence. It comes from practice, experience, and habit.
Young people are likely willing to expose their personal lives to the digital universe; what’s a bit of GPS data mean to your loss of privacy? Probably very little.
While the company maintains that it will guard the privacy of customers, I cannot imagine that this will last. It will be too tempting for the company to sell a driver’s location to businesses selling products and services in that neighborhood, just the way cell phone GPS programs do. Hopefully they will offer the option of paying more for insurance and opting out of the excessive commercialization of one’s brain waves.
A horrible innovation is by those insurance companies removing the link between conduct and accountability. Allstate’s Accident Forgiveness plan says that rates won’t go up, even you are at fault! Who would create such a goofy moral hazard?