Web browsers and Google (NSDAQ:GOOG) may hold the key to consumers’ online behavior, but when it comes to their driving habits, GPS device makers like Garmin (NASDAQ:GRMN) and Netherlands-based TomTom have the data that everyone from insurers to carmakers and the police would love to get their hands on.
TomTom has made news before when it comes to sharing its users’ data. According to the Wall Street Journal, the company (through a third party) provided driver data to Dutch police officials that allowed them to optimize the placement of traffic cameras and speed traps. The resulting public outcry prompted a YouTube apology to customers by CEO Harold Goddijn. TomTom provides driver data to government agencies in Canada and the U.S., with driver data from Canada used by the city of Toronto to refine its emergency evacuation plans. GPS data has been used in accident investigations as well.
The most recent development in data sharing and GPS companies again involves TomTom. This time, Europe’s largest GPS manufacturer has announced a partnership with U.K. insurance firm Motaquote.
Beyond the usual data
Traditionally, car insurance companies set premium rates that are based on risk factors that reflect the statistical likelihood of a customer making a claim: the driver’s age, where he or she lives, driver gender, the model and year of the car being insured, distances driven, and other key information.
These variables aren’t always accurate predictors, though: a young driver in an expensive sports car deemed high risk may be a cautious driver who never has an accident, where a low-risk customer, such as an older driver in a minivan, may be a habitual speeder who causes a crash. By agreeing to have a TomTom GPS unit installed on their vehicles, Motaquote’s Fair Play drivers will be charged premiums that reflect their actual driving habits.
According to trade publication IBR, a specially developed TomTom unit will be used, benefiting both drivers and the insurance company. Drivers will receive live traffic information, updated every two minutes—information that, at least theoretically, will help reduce their driving time. Motaquote will be able to monitor driver data ranging from routes taken on trips to other measurable factors such as speed, sharp braking, and even how sharply corners are taken. Analysis of this real-life driving behavior will be used to help in the calculation of premiums come renewal time.
While good drivers may expect to benefit from Fair Play, drivers with poor habits—including those who don’t realize they have poor habits or those who provide false information to their insurance broker (such as how far they commute on a daily basis)—are likely to see their premiums reflect their risk. The real winners will be insurance companies, which would have a more accurate way of assessing their customers’ behavior behind the wheel, along with GPS manufacturers who could see even wider adoption of their devices in vehicles. If Fair Play auto insurance is a success in Europe, expect to see a version in the U.S. market before long.
As of this writing, Brad Moon did not own a position in any of the stocks named here.