In the world of auto insurance discounts, the biggest savings are tied to telematics.
State Farm’s Drive Safe & Save promises up to 30 percent off your auto insurance premium for safe driving; Progressive says it “handed out over $1.2 billion in discounts” through Snapshot. Although Allstate no longer advertises an average or maximum discount on its website, it claimed in the past that discounts from the Drivewise telematics program could total as much as 40 percent.
But for many drivers, concerns about data privacy are a major deterrent. Before drivers can earn a telematics discount, they must opt into a program that permits their insurance company to collect huge amounts of personal data, including geolocation data, often with limited, hard-to-find or murky information about how that data will be stored or used.
In recent months, these privacy concerns have made their way to state lawmakers, attorneys and attorneys general, with lawsuits and proposed legislation cropping up across the country in a patchwork attempt to regulate how insurance companies use customers’ telematics data.
Why state authorities are cracking down on insurance telematics
First, it was Texas. In January, Texas Attorney General Ken Paxton sued Allstate and its telematics partner Arity, alleging that the two companies had conspired to collect and sell telematics data from over 45 million Americans. Attorneys in Illinois followed suit in February, filing a class action lawsuit against Allstate in federal court.
Automakers that collect telematics data via in-vehicle technology have also come under fire for data-sharing partnerships with insurance companies. In April, lawyers in Texas filed a class action lawsuit against Progressive and Toyota for sharing customers’ driving data without consent.
In the meantime, lawmakers in several U.S. states have introduced new legislation that would put restrictions on the way insurance companies gather and use customer data for the purposes of telematics. Legislators in Maryland, Missouri, New York, North Carolina and Tennessee introduced bills focusing on transparency and consumer protection:
- Maryland Senate Bill 984: Would require insurers to disclose what data they collect for the purposes of telematics.
- Missouri House Bill 1121: Would prohibit insurers from purchasing driving data from third parties like manufacturers.
- New York Senate Bill 5486: Would require insurers to file the methodologies they use to calculate telematics discounts with the superintendent and disclose them to the public.
- North Carolina House Bill 81: Would require written notification and consent from policyholders.
- Tennessee Senate Bill 195: Would require insurers to obtain consent from policyholders and make disclosures about how telematics data is collected and used.
Of these five bills, only North Carolina’s HB 81 has seen significant forward momentum. The rest have stalled in committee or been withdrawn entirely by the lawmakers who introduced them.
Less than one in four Americans trust companies to do the right thing with their data
Sharing data with companies is a constant part of daily life for most of us — but it’s also a source of deep concern for many Americans. A 2023 study by the Pew Research Center found that 81 percent of Americans are very concerned about how companies use the data they collect from them, with 42 percent saying they’re “very worried” about companies selling their personal information without their knowledge. Just 21 percent of Americans, the study found, are confident that those who have access to their personal information will do “what is right.”
That leaves many drivers stuck between the rock of rising premiums and the hard place of privacy fears.
More states are passing data privacy laws, but they may not protect telematics users
The burst of lawsuits and legislation surrounding telematics privacy comes out of a bigger trend: state efforts to regulate data privacy in an increasingly online world.
Data privacy is a hot topic in state capitols these days, with 19 states passing comprehensive data privacy laws since 2018 — most of them within the past two years. California kicked it off in 2018 with the California Consumer Privacy Act (CCPA), and 18 states have followed.
With so many states passing data privacy laws in the past few years, it’s not unreasonable to assume that other states will follow, rolling out protections for consumer data, including personal and geolocation data shared through telematics programs.
There’s just one problem, says Kara Williams, law fellow at the Electronic Privacy Information Center (EPIC): most of these state-penned data privacy laws don’t amount to much. In a recent review of all 19 laws conducted by Williams and her EPIC colleagues, most received “D” or “F” grades.
Basically, companies — including the insurance companies and the car companies themselves — can do what they want [with customer data] as long as they’ve put what they’re doing in a privacy policy.
— Kara Williams, law fellow, Electronic Privacy Information Center
The problem with those privacy policies, she says, is that they leave consumers with limited control over their data: “You essentially have to accept the terms or not do the thing you’re trying to do.” In this case, that means choosing between signing away control over personal data or giving up on what may be the biggest discount opportunity available.
Even states with relatively robust data privacy laws may not adequately protect consumers in the case of usage-based insurance. Williams and her colleagues gave Maryland’s newly passed Online Data Privacy Act a generous “B-“. The bill includes specific exemptions for insurance companies, allowing them to use customer data as needed without complying with the law’s new provisions.
Data minimization: A key to reliable privacy laws?
One of the problems with the way privacy laws currently operate, Williams says, is that they require consumers to take control of their own data privacy. While putting the consumer in charge might sound like a good thing, what it means in practice is that ensuring your data is being used in ways you’re comfortable with requires a lot of research.
If you’ve ever scrolled to the bottom of a long terms and conditions page just to click “I agree” and get on with your day, you’re probably familiar with this dilemma. Technically, you’ve been notified and given a chance to consent to (or opt out of) data collection, but in practice, most consumers likely aren’t making a truly informed decision. A privacy framework that allows companies to collect large amounts of data and places the responsibility for privacy on the consumer effectively means that a lot of us are flying blind when it comes to data privacy — and that includes many drivers signing up for telematics programs.
A partial answer to this dilemma, EPIC’s analysts believe, is legislation that emphasizes data minimization: that is, restrictions on how much data companies can collect in the first place. “We advocate for the data minimization framework because it shifts the onus onto the companies to make sure they’re handling data responsibly,” Williams says. By shrinking that pool to only the data that’s truly necessary to provide the service customers are looking for, data minimization has the potential to make transparency more meaningful and privacy laws more impactful.
What this means for most of the country
While the wheels of progress are churning furiously around the issue of data privacy, most Americans remain where they started, with little autonomy in the telematics process. If your state hasn’t passed data privacy legislation or regulations on telematics — or if those protections exclude insurance companies — you may be stuck choosing between trusting your insurer to use your data responsibly or giving up the chance to qualify for lower insurance rates.
EPIC’s 2025 State of Privacy report notes that six states — Arkansas, Idaho, Kansas, Nevada, North Dakota and Wyoming — have never considered, much less passed, a data privacy bill. Twenty-five have considered this type of legislation but have yet to pass it.
New England may be the next region to watch for stronger protections on consumer data: Maine, Massachusetts and Vermont are all working on comprehensive data privacy laws this year. But whether those laws will pass and whether they’ll offer meaningful protection to customer data in the insurance space remains to be seen.
In the meantime, it’s important to understand the data privacy legislation (or lack thereof) governing how insurers operate telematics programs in your state. If you’re on the fence about enrolling in a usage-based insurance program, consider taking the following steps:
- Read privacy policies carefully: Your insurance company should have a privacy statement on its website or app explaining the data it collects via telematics, along with how it’s used. Taking time to read any privacy policies provided by your insurer can help you make an informed decision about opting into usage-based insurance.
- Know your rights: Depending on your state’s laws, you may have the right to access, correct or delete the personal information your insurance company collects — or you may have none of these rights.
- Ask questions: While agents may not have answers to all of your usage-based insurance questions, your insurer may have a dedicated support team for its telematics program who can help you understand the agreement you’re entering with your insurer.
- Check your automaker’s telematics practices: Even if you choose not to opt into your insurer’s telematics program, the lawsuit against Progressive and Toyota indicates that some insurers may obtain your driving data through a partnership with your car’s manufacturer. Understanding the telematics systems in your vehicle and how the automaker in question uses them could help you protect your data.
- Weigh the costs and benefits of telematics: Despite the concerns it raises about data privacy, telematics can be a powerful tool for safe drivers looking to lower their insurance premiums — especially if your rates are currently high due to non-driving factors like your age or credit. Savings could outweigh any discomfort you may have with the privacy risks of opting into these programs.
Why the promise of telematics may still be worth fighting for
Although privacy concerns may remain a problem for insurance consumers in many states, telematics still holds a powerful incentive not offered by most other insurance discounts: the chance to break free from an outdated system of insurance pricing.
Traditionally, insurance companies base their pricing on risk calculated from third-party data: motor vehicle reports from the DMV, geographic crash data from law enforcement and demographic safety statistics drawn from organizations like the National Highway Traffic Safety Administration. In this pricing model, you’re assigned a premium based on the groups you belong to — for instance, young driver, convicted speeder, resident of ZIP code 33101 — and the average risk carried by those groups.
That approach to car insurance pricing leaves policyholders with surprisingly few ways to change the cost of their insurance.
“For most people, the only way to lower their insurance costs is to shop around or reduce their coverage, and that doesn’t actually reduce risk,” says Ryan McMahon, senior vice president of strategy at Cambridge Mobile Telematics, the world’s largest telematics service provider. “Telematics offers something different.”
It’s one of the few parts of insurance pricing that’s truly in the customer’s hands. They decide when and how to participate, and they can take real, measurable steps to improve their rate with actionable feedback. And because the incentives are aligned with safer driving, it helps make the roads safer for everyone.
— Ryan McMahon, senior vice president of strategy, Cambridge Mobile Telematics
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