Introduction
The insurance industry is witnessing a significant shift with telematics technology and Usage-Based Insurance (UBI). Telematics systems use in-car sensors to monitor driving habits, while UBI adjusts premiums based on this real-world driving data. While these innovations promise more personalized rates and safety benefits, many drivers have legitimate concerns about their personal information – what's being collected, shared, or potentially sold. With telematics policies now representing roughly 8–9% of U.S. auto insurance in 2023, both insurance companies and regulators are focusing on addressing privacy concerns and rebuilding consumer confidence.
1. Data Privacy Concerns in Connected-Car Telematics
1.1 Types of Personal Data Collected
- GPS location tracking, speed measurements, direction of travel, odometer readings, and vehicle identification details according to Smartcar[1]
- For electric vehicles: battery charge status, charging information, range estimates, and fuel levels (Smartcar)[1]
- Various sensor readings including tire pressure monitoring, engine oil condition, battery health, window status, engine operation, and directional data (Compass IoT)[2]
- Vehicle network data: engine performance metrics, fuel consumption, ignition status, trip categorization (work vs. personal), and driver identification (FleetGO)[3]
1.2 Principal Privacy Risks
- Unauthorized tracking and potential re-identification from supposedly anonymous datasets
- Data being sold to third-party information brokers with continuing risks of identification
- Security vulnerabilities that could allow vehicle hacking or unauthorized control
- Scope creep: insurance data potentially being repurposed for job screening, police investigations or marketing campaigns
- Lack of standardized privacy policies across different car manufacturers
1.3 High-Profile Consumer Complaints & Advocacy
- The Mozilla Foundation has highlighted problems with default data sharing settings, limited user control options, and excessive data collection
- Many complaints focus on collection of non-driving information (like voice recordings, entertainment system usage, and synchronized contact information)
2. Legal Landscape: Lawsuits & Regulatory Enforcement
2.1 GM Class-Action Lawsuits
General Motors is currently facing 27 combined class-action lawsuits. These legal challenges claim OnStar improperly collected and sold precise driving information (including GPS coordinates, speed data, braking incidents, and behavior ratings) for approximately 1.5 million customers without proper consent, as reported by Road & Track[4].
2.2 FTC Investigation & Enforcement
In January 2025, the Federal Trade Commission settled its first privacy case involving connected vehicles against GM/OnStar. The FTC determined these companies were tracking drivers' locations every three seconds without getting proper consent (FTC)[5]. The settlement requires GM to: - Stop sharing location and behavior data with consumer reporting agencies for five years - Provide clear notices and get specific, opt-in consent before collecting or sharing data - Give consumers rights to view, delete and opt-out of data collection, with some exceptions
2.3 Key Legal Arguments
- Improper collection of precise location and behavioral information without legal justification
- Misleading signup processes and inadequate disclosure of how data would be used
- Inappropriate selling of consumer information leading to negative insurance outcomes
"GM monitored and sold people's precise geolocation data… as often as every three seconds."
— Lina M. Khan, FTC Chair[5]
3. Industry Trends & Impact on Consumer Trust
3.1 UBI Adoption & Telematics Growth
UBI continues growing across North America and Europe, driven by smartphone-based monitoring and consumer demand for usage-based pricing. Key market projections for 2025:
| Source | 2025 Market Size (USD billion) | CAGR Projection |
|---|---|---|
| Mordor Intelligence | 43.56 | 11.34% (to 2030) |
| Cognitive Market Research | 44.68 | 22.7% (to 2033) |
| The Business Research Company | 83.11 | 26.4% (to 2029) |
| Market.us | — | 25.5% (to 2033) |
By 2028, Europe and North America are expected to have nearly 43.9 million telematics-based policies (BusinessWire)[6]. Pay-How-You-Drive programs are among the fastest growing segments, using 5G networks and Internet of Things technology for immediate driver insights.
3.2 Privacy Incidents vs. Adoption
- Strong privacy laws like Europe's GDPR and California's CCPA help build customer trust and participation.
- Data accuracy problems (like overestimated mileage or misclassified driving events) can damage trust and create disputes.
- Insurance companies are investing in equipment calibration, stronger security measures and clearer disclosures to maintain credibility—especially in states with weaker privacy protections.
3.3 Consumer Opt-In Statistics
| Region | 2022 Opt-In Rate | 2023 Opt-In Rate | 2024 Projected |
|---|---|---|---|
| United States | 6–7% | 8–9% | ~10% |
| Italy | 22–25% | 25–28% | 28–30% |
| United Kingdom | 7–10% | 8–12% | 12–14% |
| Rest of Europe | <5% | <5% | Modest growth |
The quick growth in policy numbers shows increasing willingness to share driving information when insurers offer transparency and potential savings.
4. Best Practices for Insurer Transparency & Data Protection
4.1 Effective Transparency Measures
- Simple, straightforward explanations of what information is gathered, why it's needed, and how it affects insurance rates (Samsung Insights)[7]
- Easy-to-use controls for opting in or out of telematics, marketing messages and data sharing
- Customer portals where drivers can review their driving data, policy preferences and costs
4.2 Data Protection Policy Recommendations
- Follow guidelines from the FTC, National Association of Insurance Commissioners, and Centers for Medicare & Medicaid Services
- Regularly check data accuracy and quality, working with state insurance departments
- Clearly explain data storage, retention and deletion practices
- Keep privacy policies updated as regulations and best practices evolve (NAIC)[8]
4.3 Case Studies
| Aspect | Transparent UBI Programs (2024 Outcomes) |
|---|---|
| Rollout Scope | 70% of commercial insurers expanding UBI offerings within 2 years[9] |
| Transparency Measures | Real-time dashboards, clear consent dialogs, regular driving summaries[9] |
| Trust & Adoption | Higher opt-in among previously reluctant drivers, boosted satisfaction[9] |
| Behavior Improvement | Up to 77% reduction in violations with clear feedback mechanisms[9] |
Insurance companies that communicate extensively about data usage and risk calculations tend to see better customer engagement and retention.
5. Consumer Sentiment & Advocacy
5.1 Common Complaints
- Unintentional opt-ins without clear notices about data collection scope
- Feeling forced to accept data collection to access important safety features
- Unclear retention policies that allow indefinite data storage
5.2 Advocacy Group Campaigns
- Consumer Reports: Pushes for strict limitations on how telematics data can be used beyond risk assessment
- Electronic Privacy Information Center: Advocates for stronger consumer controls and comprehensive federal laws
- Legislation like the American Privacy Rights Act of 2024 remains stalled, highlighting gaps in protection
5.3 Sentiment Mapping
- Trust remains mixed: some drivers appreciate savings and safety feedback; others avoid intrusive practices
- Privacy-conscious consumers often select traditional insurance plans or basic monitoring devices
6. International & Comparative Legal Frameworks
6.1 U.S. vs. GDPR & China PIPL
- U.S.: Fragmented state-level laws (like California's CCPA), voluntary industry principles
- EU's GDPR: Consistent requirements for consent, data minimization, right to deletion (Article 5)
- China's Personal Information Protection Law: Similar to GDPR in scope, requires explicit consent, restricts data transfers
6.2 Extraterritorial Compliance for Multinationals
- GDPR and PIPL rules apply to any company processing EU or Chinese residents' data, regardless of where the company is based
- Requirements include tracking data flows, documenting legal bases, conducting privacy impact assessments and implementing proper data transfer agreements
- Non-compliance risks include large financial penalties and reputation damage
Conclusion
Telematics-powered UBI is revolutionizing how insurance companies assess risk and encourage safety, but it creates significant privacy and trust challenges. Maintaining customer confidence requires transparent data practices, strong security measures and strict compliance with evolving global regulations. Insurance companies that prioritize clear consent processes, accessible data controls and regularly updated policies will lead the market in customer adoption and loyalty.
References
- Smartcar. (2024, October 11). What Is Embedded Telematics? Smartcar Blog. https://smartcar.com/blog/what-is-embedded-telematics
- Compass IoT Global. (2023, December 1). The Ultimate Guide to Connected Vehicles: Part 3 – The Data. https://www.compassiotglobal.com/ultimate-guide-to-connected-vehicles/part-3-the-data
- FleetGO. (2024, April 1). Telematics Data. https://fleetgo.com/kb/telematics/telematics-data/
- Road & Track. (2025, January 23). GM Facing Class-Action Lawsuits Over Selling of Driver Data. https://www.roadandtrack.com/cars/a63528432/gm-facing-more-than-25-class-action-lawsuits-over-selling-of-driver-data/
- Federal Trade Commission. (2025, January 16). FTC Takes Action Against General Motors for Sharing Drivers' Precise Location, Driving Behavior Data. https://www.ftc.gov/news-events/news/press-releases/2025/01/ftc-takes-action-against-general-motors-sharing-drivers-precise-location-driving-behavior-data
- BusinessWire. (2025, January 9). Insurance Telematics in Europe and North America Report 2025: Europe and North America to Reach 43.9 Million Insurance Telematics Policies by 2028. https://www.businesswire.com/news/home/20250109522500/en/Insurance-Telematics-in-Europe-and-North-America-Report-2025-Europe-and-North-America-to-Reach-43.9-Million-Insurance-Telematics-Policies-by-2028---ResearchAndMarkets.com
- Samsung Insights. (2024, September 24). Why Insurance Transparency Matters and 3 Tips to Improve It. https://insights.samsung.com/2024/09/24/why-insurance-transparency-matters-and-3-tips-to-improve-it/
- National Association of Insurance Commissioners. (n.d.). Transparency and Readability of Consumer Information. https://content.naic.org/insurance-topics/transparency-and-readability-of-consumer-information
- Bumps in the Telematics Road: Privacy and Transparency. (2024, November 15). CASACT. https://ar.casact.org/bumps-in-the-telematics-road-privacy-and-transparency/