Insurance Spyware: TX sues Allstate for allegedly tracking driving habits of customers without their knowledge

It was embedded in third party apps

Right out of college I was an insurance underwriter for a large property and casualty insurer which will remain nameless. My job was to assess the risk our insureds presented to the company on an individual and regional basis. Before that I sold auto insurance for another large property and casualty insurer while I was in college. Insurance is an honorable business and generally makes people’s lives easier when the unforeseen hits. Saying that, insurers also want to minimize their exposure to potential loss. This is perfectly reasonable. For insurers there is a constant battle to balance income and exposure.

Insurance is also a “highly regulated business” where regulators are both friend and foe. The stroke of a regulator’s pen can mean billions in income for the big P&C insurers. Alternatively regulators can go the other way and introduce regulations that restrict the ability of insurers to underwrite for risk effectively, raise rates, or to actively mitigate potential losses. There is a giant wink/nod crony factor in insurance. Backs are scratched and strings are pulled.

Incidentally this cozy relationship with government is one of the chief reasons Warren Buffett (through Berkshire Hathaway) owns GEICO, which stands for Government Employees Insurance Company, which was originally founded for government employees at the birth of FDR’s great government expansion. The company that insures the employees of the state will always be smiled upon, and in the event of a massive catastrophe, always bailed out. Buffett recognized this and built it into his portfolio.

Government and insurance are always in a bizarre crony tango. Allstate may have just taken a few missteps in Texas however.

At issue is the fact that Allstate developed specialized tracking software that was then embedded into other third party apps like GasBuddy and Routely. This software tracked how fast drivers went, whether they broke at unusually rapid rates, pretty much everything an insurance company would ever want to know. Then they used this information to adjust rates. OK, fine. But Allstate gathered this information without their customer’s permission, and it even sold this information to other insurance companies.

At the very least customers should have had to opt-in, even if it was buried in boilerplate. But not even this was done.