Question

In: Operations Management

Should auto insurance companies be able to force you to have a little black box type...

Should auto insurance companies be able to force you to have a little black box type device, or a similarly functioning smartphone app, that records your driving habits, or pay a penalty not to do so (or get a discount for using the device - in the end a penalty for not using, or a discount for using are basically the same)?

Solutions

Expert Solution

Hello! I hope you are doing well !

Answer:

A person's decision to use this kind of mobile application which records his driving habits is based on his own understanding.

The company will rate you on the basis of your performance on the application. The application rates you on the basis of :

  • Their driving speed, smoothness, distraction level and fatigue by recording start and end time of drive.
  • Use your GPS location
  • Parents can also monitor their children driving habits by using this app.
  • App sends information to auto insurance companies when users commits a traffic violation or fault accidents.

High rated customers can earn high discounts while low rated customers have to pay penalty or their premiums amount can be increased.

Well, to use this app or not is based on individual's willingness to trade his privacy or surveillance of his driving habits for discounts.

Most people will find it unacceptable. Users can be uncomfortable knowing that their auto insurance company is tracking them , using their GPS information.

And even if there is no penalty and you can earn discount by using app, company can use your driving habits information and if find them irresponsible drivers they can charge them later with high premiums.

People can accept auto insurance offer of discount by using app if they feel that they are good drivers and can earn discount and are not uncomfortable in sharing their information with auto insurance companies.

So, basically it depends on people's own perceptions that they will let company encourage them to use the app or not.


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