We're a Entering Dangerous Era Where Companies Are Going to Offer You Discounts for Your Most Private Info

In 1984, George Orwell depicted a future in which the government watches citizens’ every move. But Orwell got it only partly right. 

For many people, the most significant threat to their privacy may come not from the government but from big business, which, more than 30 years after Orwell’s mythical world, is tracking what we buy, where we go on the Internet, how we drive our cars and now even our health habits.

Insurer John Hancock recently announced that it has partnered with the Vitality Group, a global provider of incentive-based wellness programs, to offer life insurance discounts of up to 15 percent and other benefits to those who exercise regularly and take other steps to reach certain health goals. The company is monitoring customers’ progress by providing them with free Fitbit electronic activity trackers that upload information about the number of calories customers burn, the amount of walking or running they do and even their gym visits. Transmission of some types of data requires the wristwatch-like devices to relay a person’s location.

Customers can limit how much information is sent, although doing so could affect the size of their discounts. John Hancock says the program could save a couple more than $25,000 on their life insurance premiums over 40 years. People can also receive travel, shopping and entertainment-related rewards. Customers can use their own devices, such as an iPhone or Apple Watch, to provide the data, or they can enter information manually using an app.

This is just one example of increasing efforts by insurers and other companies to offer financial incentives in exchange for customer information.

Progressive, Allstate and several other insurers offer car insurance discounts to customer who let the companies monitor their driving habits using electronic devices installed in their vehicles. The discounts are available only to those who, based on the transmitted data, demonstrate that they meet the insurers’ definition of safe drivers. Some of the devices monitor only mileage driven, while others let the companies track or calculate acceleration, time and date and location.

Growing Debate

Questions about consumers voluntarily trading their personal information for discounts are not new. People have long debated the use of discount loyalty cards that let supermarkets and other retailers track the items shoppers buy. But with the development of increasingly sophisticated electronic devices that can monitor people’s behavior, whether it’s how they drive their cars or how much they exercise, privacy experts are becoming increasingly concerned. 

“Sometimes consumers freely give out their information without thinking what the consequences are going to be,” said Paul Stephens, director of policy and advocacy for the Privacy Rights Clearinghouse. Among Stephens’ concerns is that it’s impossible for a consumer to know for sure how the information might be used. Even if the company has a privacy policy that bars the data’s dissemination, as most do, the information might be hacked. And the privacy policy may change. For its Snapshot driver monitoring program, Progressive advises participants to check its online terms and conditions page regularly.

The insurer’s fine print also points to one of Stephens’ biggest concerns. No matter what the privacy policy says, a court can demand the data’s release. Progressive notes that the information collected by its Shopshot telematics device could be used to determine whether the customer is at fault in an accident.

“This information may be sought by opposing parties in a civil lawsuit or by police when investigating the cause of an accident, or we may be legally obligated to provide such information in response to a subpoena or as otherwise required by law,” the terms and conditions say.

The fine print for Allstate’s Drivewise program contains a similar warning. It goes on to say that “you should not expect to retain data privacy or confidentiality.”

Both Progressive and Allstate also say that the information may be given to insurance regulators in support of the companies’ proposed rates.

Programs are Voluntary

The insurance industry acknowledges that some people may not be comfortable being monitored, but it underscores that such programs are optional and that the information will be used only to provide discounts, not surcharges.

Jeanne Salvatore, a spokesperson for the Insurance Information Institute, says people already must provide their age, sex, Social Security number and other personal information when applying for insurance.

She says consumers often give up sensitive information in other ways as well, such as when they use a GPS-enabled cell phone. That information also can be subpoenaed in a courtroom proceeding.

“It’s the same with your cell phone records and everything else,” she said.

Salvatore says that such insurance company monitoring programs can benefit customers not only by offering discounts, but by encouraging them to drive more safely or adopt a healthier lifestyle.

“Not getting into an accident because you are trying to be a safer driver is a benefit in itself,” she said.

She added these new programs only allow insurers to more accurately predict risk, allowing some customers to pay less than they otherwise would. For those who don’t want to participate, she said, there are many other choices.

Going Too Far

Julia Horwitz, who oversees consumer privacy projects at the Electronic Privacy Information Center, says there’s a difference between collecting static information about a person, such as date of birth or sex, and dynamic data, such as how or where they drive or exercise. She’s troubled that companies may record incidental information that is irrelevant to their business purpose, such as the churches or mosques someone attends and how often.

Another concern is that as these programs grow, those who refuse to participate may end up subsidizing those who do and end up paying more as a result. She says some people, especially the poor, may feel they have no choice but to enroll, even if they’re uncomfortable with having a company monitor their lives in real time.

“These types of programs can be coercive in that, if you feel as though you can’t afford not to participate, you’ll just sign up,” she said.

But even that may be impossible. Some programs aren’t available in all states, and the devices needed for auto insurance monitoring likely aren’t compatible with hybrids, diesels and pre-1996 vehicles.

Horwitz also is concerned that even after agreeing to personal monitoring, some people won’t be deemed eligible for a discount anyway, something they likely won’t know ahead of time.

She says this is an area that shouldn’t be left to consumer discretion but that instead needs congressional or government agency oversight.

Do Consumers Care?

Melissa Simon Berczuk, a Progressive spokesperson, said the privacy issue is not a big concern for many customers.

“We also conducted extensive consumer research as part of our development of this solution, including multiple in-depth consumer focus groups, and in them found very little concern about privacy/sharing this limited data,” she said in an emailed statement.

But judging by the comments posted online, not everyone is comfortable being electronically shackled to a company, even for a discount or other incentive. In response to a CNN Money story about the John Hancock initiative, one reader wrote: “I cannot believe people would buy into this. This is even more invasive than putting those spy modules in your car. All for a few dollars?”

A reader commenting on a National Public Radio blog said the John Hancock program should be prohibited. “This is really saying that people will be charged more for not exercising and submitting data.”

Another reader questioned whether the program is fair to those who, for some reason, can’t exercise.

“Don’t have time because you're working two jobs? Too bad. Pay more,” the reader said. “And if I subscribe, then I pay with my privacy. Nice.”

But there also were those who didn’t seem troubled by the privacy issue.

“I'm 100% for this,” one commenter said in response to the CNN Money story. “The media is filled with a sea of reasons why we should improve our health, but we're becoming more obese as a nation. Money is the strongest motivator.”

Another said his company already uses such a program.

“My health insurance is free for being healthy and tracking it with my device. It's great,” the reader wrote.

What You Should Do

Don’t simply agree to participate in these types of programs without careful research. Here’s what you should do.

Check the terms and conditions. Find out exactly what data will be collected and how the information will be used. Can you limit how much information is communicated and whether it’s shared with affiliates or other third parties? And what’s the effect on your eligibility for discounts or other benefits if you do?

How much of a discount is the company offering and what measurements will it use to determine whether you qualify? What happens if it determines you’re not eligible or your circumstances change?

If you’re provided with an electronic device, do you have to use in continually or just at certain times? What happens if you forget to use it or the equipment is lost, stolen or damaged? Lose the Progressive Snapshot device and you’ll be charged $50. John Hancock says it won’t charge for a lost Fitbit.

How do you determine if there’s a change in the company’s terms and conditions or privacy policy? Will the company send you a notice, or is it up to you to visit its website and look for updates?

How long will the company keep your data? The terms and conditions for Progressive’s Snapshot program say the insurer intends to keep the information “indefinitely.”

What is the company’s liability if the information is stolen, whether from its own servers or those controlled by an affiliate with whom the data were shared?

If the answers to your questions don’t appear in a company’s privacy statement or terms and conditions, ask questions. It’s best to get the answers in writing.

Comparison shop. Don’t assume that the discount or other benefits from such a program make it the best deal available. Shop among competitors. You may find that you can pay less without being monitored.

Consider carefully. Weigh the pros and cons before signing up. Will you be able to keep up with the requirements, such as remembering to keep your health monitoring device with you? Is it even likely that you’ll qualify for whatever benefits the company is offering?

How comfortable will you be having your personal information retained by a company, perhaps even long after you’re no longer a customer? Would it trouble you if your information is hacked or subpoenaed by a court?