Big data, online behavior and auto insurance

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Big data is everywhere. Everything done online helps companies place targeted ads in front of you. Look up anything, and that product’s ad shows up on Facebook or Instagram.

Granted, sometimes it can be helpful when a website seems to know exactly what I’m looking for (albeit a little creepy). But these companies aren’t tracking and selling our data just for our benefit.

Auto insurance companies are among the many industries looking for ways to turn our online (and offline) activities into higher profits. Selling us coverage that Montana requires us to purchase, these companies use complicated algorithms based on our shopping habits, personal characteristics, and other behaviors aimed to predict how each of us might react to different sized price hikes, even if our actual likelihood of causing an accident is the same. They call it “price optimization.”

Driving records and how many miles we drive should play a role in how much we pay for auto insurance coverage. It wouldn’t be fair to charge a good driver, the same price as someone who has caused several accidents. This model links the price we pay for coverage to the risk we bring to the roads.

Price optimization programs don’t even claim to be based on risk; it’s just a way to charge some customers more because insurers think they can get away with it. It’s a “if our customers don’t shop around, they won’t notice if we charge them more” model.

Our data is everywhere. We need to make sure that insurance companies are not charging us based on our shopping habits, or how much profit they think they can squeeze out of us. We are required by law to buy insurance and lawmakers need to protect us from greedy companies who want to use price optimization techniques to judge us.

We didn’t stop insurance companies from using our credit history to set our auto insurance premiums. Now they base policy prices on our credit and that plays a much larger role in determining our premiums than most people would ever guess. Allowing this practice has enabled badly acting insurance companies to charge huge amounts to good drivers with less-than-perfect credit scores. We need to protect ourselves and loved ones from insurance companies.

Over the past five years, roughly 20 states have requested that insurance companies avoid price optimization — also known as “price elasticity of demand” — to rate customers’ policies. In 2015, Montana’s former Insurance Commissioner Monica Lindeen requested this of insurance companies. We need current Insurance Commissioner Rosedale to reiterate this message, and we need lawmakers to enact SB 279. Montana law should require that insurance policies be based our driving records, not what big data says about us.

— Alex Riccardi, Livingston

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