A car caught in floodwaters in Auckland on 9 May 2023, that and Cyclone Gabrielle were a major contributer to a rise in car insurance premiums, Consumer NZ’s Rebecca Styles says.
Photo: Supplied
Car manufacturers in the United States are collecting data about the way people drive their vehicles – and it could start happening in New Zealand, too.
It comes as Consumer NZ says car insurance premiums have risen by almost 40 percent in the past three years.
In the US, insurers are using the data they receive from car computers to hike premiums based on driving behaviour.
New York Times technology feature writer Kashmir Hill has investigated how insurers there are using data provided by automakers.
Modern cars had been called “smartphones on wheels”, she told Nine to Noon.
“You know if you’ve bought a car recently, it has an internet connection or a cellular connection so it can send data back to the automakers.”
In the US that had led to some car manufacturers collecting data about how people were driving their vehicles and then sharing that information with data brokers who worked with insurance companies, she said.
That might include information such as how fast they were driving, when they were hitting the brakes, what time they were driving and how many kilometres they were driving, she said.
“So we’ve seen the rise of something called a driver score and it is becoming a factor for some people in how much they pay for insurance.”
Styles said she did not believe this was happening in New Zealand, likely due to this country’s old car stock. But she said if it was happening overseas it would likely start occurring in New Zealand in the future.
Hill said an example was Verisk, a data broker that works with insurance companies.
“So Verisk was getting data from a few different auto makers including General Motors and Hyundai.”
Hill said she found out that data was being collected on her car while working on a story on the topic.
“I discovered that my electric vehicle which is a Bolt, a Chevrolet Bolt made by GM, was collecting information about my husband and I were driving it.”
Verisk paid for access to the data and in some cases was passing the information to insurers about how risky their clients or potential clients were, she said.
US insurers might also go to data analytics company LexisNexis for information such as whether a person had been in a car accident, or their credit score which was a big factor in how auto insurance was assessed for Americans, she said.
“LexisNexis also started gathering this data from automakers for the purposes of kind of giving insight into how people are actually driving their cars.”
Insurers have wanted this type of information for some time but Americans have resisted signing up to any programme because they did not like the idea of being monitored by insurance companies, she said.
“So instead we’ve seen this approach of your car gathers the data, some smart phone apps gather data about how you drive and so they’re kind of getting it in a way that is not clear to the consumers that are affected.”
Hill said she tried to determine whether she had somehow inadvertently opted in to a programme that meant she would share information about how she was driving with data brokers.
“In my case it happened when we bought the car, at some point during that process a kind of box had been ticked that said ‘Yes, we want this data to be collected from our car’. In my case I think the salesman actually ticked the box.”
The information was disclosed to Hill in a privacy policy.
Hill said as a result of her reporting General Motors had now decided that the process of gathering consent was not adequate and it had now stopped selling data to LexisNexis and to Verisk.
But she said it was still happening with lots of different car brands and some smart phone apps.
Kenn Dahl leases a Chevrolet Bolt and his insurance cost went up.
He asked the insurer why this had happened given he had had no accidents or no speeding tickets.
The insurer told him to check his report from LexisNexis which he did.
“LexisNexis had a record of every trip he had taken in his car, you know how many miles had had driven or his wife had driven, what time of day, the exact time he’d driven and then the number of times he had hit the brakes, accelerated rapidly or sped and all of the data had come from General Motors.”
Dahl was very shocked and upset by this and had not realised the data would be collected, she said.
“He really didn’t feel like it reflected the kind of driver he was and he had a lot of questions about you know ‘What is hitting the brakes too hard?’ ‘What is accelerating too rapidly?'”
The companies and smart phone apps collecting this type of data say they are doing so with people’s consent and that people realise the data is being collected, she said.
“The data brokers say they’re not sharing this data with insurance companies without consumer consent but in some cases you know I don’t know people are realising when they’re giving consent.”
For example in the United States when you seek an auto insurance quote from an insurer, there is usually a box to tick “where they say, you know you’re giving us permission to pull third party reports about you”, she said.
That would include a person’s credit history but also could include this driving data given it is collected by a third party, she said.
“I just don’t think when people said ‘yes you can have access to third party reports’ that they realised well that includes every trip you have ever taken in your car cause they just didn’t realise that data was being collected by a third party.”
Hill said she hoped that her reporting would lead insurers to change this and give consumers clear information about data that was being sought and that “clear consent” was sought.
Car insurance premiums rising
Consumer NZ investigative team leader Rebecca Styles said with the almost 40 percent increase in recent years, some New Zealand drivers were weighing the risks, and opting for third party or third party, fire and theft insurance only.
The Insurance Council says there are lots of variables driving the hikes – including the age of drivers, area, type of car and its gadgetry, rising repair costs, last year’s extreme weather events and the state of the roads.
Consumer NZ says premiums for comprehensive car insurance have increased by 38 percent since 2021.
Styles said the insurers were always assessing risk to see if they were paying out more than they were collecting and if they were that was what led to premium price hikes.
“I do think the Auckland floods and Cyclone Gabrielle that was a big shunt in terms of price, I think that was a major factor.”
If you were the owner of a frequently stolen vehicle that would also affect your premium, she said.
In order to lower the insurance premium on such a vehicle the owner might need to prove that they had it locked in a garage or had an immobiliser on it, she said.
Insurers would also charge a higher insurance premium for younger people because they were higher risk, she said.
Some insurers also differentiated on the basis of gender in which case a young man would face a higher premium than a young woman, she said.
Consumer NZ recommended that people get comprehensive car insurance but recognised that it was becoming more expensive, she said.
Third party fire and theft insurance was the next step down from comprehensive insurance, she said.
“I guess third party fire and theft is sort of that middle ground so you’d still get some insurance if your car is stolen or goes up in flames.”
But third party car insurance offered the least protection but was better than doing without altogether, she said.
“At least third party will give you some protection if you crash into somebody, cause if you went without any insurance you’d still be liable if you prang into somebody,” she said.
“If you just have an old dunger and you’re just worried about pranging into a Tesla then maybe that’s what suits your needs.”
There is a growing trend for people to let their insurance lapse without renewing it, she said.
“This year we saw 10 percent of those surveyed who were doing without coverage because of price and that’s sort of crept up from 2 percent in 2022.”
There was a slow creep of people not renewing their insurance due to cost across a range of areas, but particularly car and house and contents, she said.
People could save on insurance simply by shopping around and checking companies online insurance calculators, she said.
“Even though it’s going up you can still find a better deal for you just by shopping around.
“I think apathy is probably the worst thing with insurance, but it’s just being proactive and you know half an hour of your lift on a Sunday afternoon and just shopping to get a better deal.”
