It makes sense to share your data with an insurance provider if you are a well-behaved driver. It is well-behaved drivers that subside the insurance cost of reckless drivers.
First, that the way the insurance company uses the data is accurate. For example, if you work nights, noticing that you drive at night might cause them to raise your rates, because more of the people who drive at night are drunk. You're not drunk, you're just commuting, but now you're getting punished for giving them data.
Second, that you know what "well-behaved" is, because people who know they're being tracked will try to conform to what they think will give them a better score. So now you're focusing your attention on strictly adhering to some mental model of what you think the tracking device wants to see in order to lower your rates instead of leaving that attention to focus on actual hazards. Then you end up having to brake rapidly because you notice an actual hazard too late, which makes the tracking device penalize you more than all of your machinations were helping, or even causes you to get into a collision.
I would like to see evidence of this.
My experience: discount for sharing is low, maybe $100/year.
My expectation: if I actually get in an accident (1) the data I shared will be used against me; (2) my insurance provider will put me in a high risk pool or drop me.
It seems to me that the downside is really high and the upside is not.
Is that wrong?
P.S. If I actually had faith in all of the companies involved, I would certainly agree with the parent. However, I don't.
Rest of your analysis seems spot on. Important to note however that getting in accidents already increases your premiums - I don't really think the data sharing is gonna change that much.
People say this but it's not true. Bad drivers have higher premiums, and no one is subsidizing them.
It does make sense for good drivers to share, but only if they have opted in.
The whole point of insurance is it's a shared risk pool. Arguments like "Bad drivers make YOUR rates go up" just serve to pit customer vs. customer while insurance companies profit.
But, if the expected time to an insurance payout for a good driver is longer than their life time, then good drivers will never have enough money in their account to cover an accident that occurs.
Suppose the insurance thinks that Alice has a 90% probability of an accident and Carol has a 15% probability, so they want to charge Alice six times the premiums of Carol. Then in practice Carol is the one who has the accident and not Alice, because it's not perfect.
But the pool Alice is in is much smaller than the other one, so if they were merged, the combined group would only be paying 10% more than Carol does, which would be serving the purpose of insurance -- spreading risk. Whereas if you separate them, Alice is screwed -- even though she isn't even going to have an accident -- because now she has to pay >$7000/year in insurance rather than ~$1300 when you combine these imperfect predictions with smaller risk pools.
I think there are a few problems:
1. The opt in should have been much clearer, and probably should have been a real option not just all or nothing.
2. However, anyone who opts out will have more expensive insurance
3. Which means you have to share data that feels very personal, or be treated like a 2nd class citizen - which feels very icky.
4. Companies are sensitive to customers telling them they are icky, at least until customers get de-sensitized to the ickyness.