Give or take a credit score, underwriting personal auto policies hasn't changed much through the years. Lower premiums were dependant on your driving record—tickets and accidents—and less so on things such as where and when you drove your car and how many miles you racked up.

For many of us, that's about to change—if it hasn't already. Piling up speeding tickets will certainly keep you on the path to higher premiums, but the world of personal auto insurance is going through a disruption that hasn't been seen in any lines of insurance since risk modeling for wind storms came into vogue.

This week, I'll be in Chicago for Insurance Telematics USA 2012, a conference that brings together insurers, solution providers, and even automobile manufacturers to discuss an issue that will transform this line of business greatly over the rest of this decade.

Personal auto insurance is in flux. Carriers are competing for policyholders with huge investments in advertising as they try to lure consumers to their company with promises of great savings. It all sounds good, but it is making for a chaotic marketplace.

Throw in telematics, which insurers claim will offer consumers even lower rates if they are good drivers, and you have to wonder, like the old limbo dance, “How low can you go?”

John Lucker, a principal with Deloitte Consulting, wonders if drivers are becoming wary of the amount of personal information they are willingly surrendering to insurance carriers and other businesses in order to save a few dollars.

“There is a desirable pocket of customers that are completely disinterested in giving their data to an insurer just so they can save $100 a year,” says Lucker. “From a privacy perspective, they draw the line. They may be good drivers, but they don't want to provide their data.”

Lucker believes it is important that insurers better understand who this group of customers is that declines to participate in this technology rather than assume they have something to hide. On the other hand, there are many people who tend to be over-confident in their abilities or their image.

“How many of the people who volunteer to try these telematics devices prove to be bad drivers—the ones who would be typically avoided?” asks Lucker. “Those are the things that have to be sorted out through a study of the customer segment.”

So there is plenty to sort through for insurers—not the least of which is establishing some sort of telematics strategy—which is why this week's conference should be illuminating. I'll be reporting from Chicago and hope to have more insight on the direction—and the disruption—telematics is causing in the insurance industry.

Special Reports /

The Changing World of Automobile Insurance

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