Once used mainly for driver safety and improvement, telematics technology in vehicles is now a key factor in how auto insurers calculate risk, assess claims, set rates, and offer new coverage options. Some insurance companies are already experimenting with real-time pricing that changes based on driving data streamed directly from cars.
“Drive like a lunatic in January? Your February bill goes up,” said John Espenschied, principal at Insurance Brokers Group LLC. “Behave yourself in March? It drops back down.”
Espenschied also pointed out the growing need to protect this data as telematics technology becomes more common. He described potential risks: “some hacker locks your car and demands $500 in Bitcoin to unlock it,” he said. “That’s a real financial loss. We already have cyber insurance for businesses. This is just the car version. In three to five years, it will be standard on comprehensive policies.’’
Some experts predict that future auto policies could include reimbursement for ransomware attacks, data recovery services, and identity theft protection.
Yosi Yahoudai, co-founder and managing partner of J&Y Law in Los Angeles, told Insurify that most drivers do not realize how much personal information their vehicles collect. “With telematics, we’re talking real-time speed, braking, location — even phone use behind the wheel. That data is used to calculate premiums, assign fault in accidents, and, in some cases, deny claims outright. So yes, it’s changing the risk landscape, but it doesn’t always favor the consumer.”
Yahoudai explained that telematics data is increasingly important evidence in car accident cases—sometimes supporting drivers’ accounts and sometimes working against them.
In many U.S. states insurers already use telematics data as part of usage-based insurance programs. Consumer advocates have pushed back against using such electronic data to justify rate increases or coverage decisions; California and New York prohibit its use when setting driver premiums.
Mark S. Davis of Davis Levin Livingston noted legal challenges arising from these practices: “Policyholders increasingly challenge these decisions based on telematics on the grounds they lack transparency or that the insurer failed to investigate other factors that could explain anomalous telematics readings reasonably,” he said. “As telematics becomes more embedded, courts will likely see a surge in disputes over what constitutes a reasonable basis for rating adjustments, cancellations, or non-renewals.”
Davis added that insurers may now rely less on police reports or claimant statements by pulling stored vehicle records—including speed and GPS—to reconstruct accidents: “For attorneys handling bad-faith cases, this raises issues about the adequacy of an insurer’s investigation,” he said. “Was all relevant evidence considered? Was the telematics data properly interpreted within the context of the accident? These questions will become courtroom flashpoints.”
The United States leads globally with connected vehicles—cars equipped with features enabling data transmission for navigation and diagnostics—and Smartcar.com projects 96% of new vehicles will be connected by 2030.
This increase brings heightened cybersecurity concerns as hackers have shown they can remotely control vehicle functions.
“Hacking and data theft are no longer sci-fi,” said Yahoudai. “If your car is essentially a rolling smartphone, ransomware coverage might not be far off.”
Experts believe as artificial intelligence (AI) and predictive analytics further integrate into connected cars’ ecosystems—and as internet connectivity grows—the industry may expand coverage to address cyber risks such as breaches involving personal information linked to telematics systems or ransom-related losses.
Davis cautioned that these developments would introduce new types of claims—and likely lead to legal disputes over policy exclusions if insurers deny coverage for emerging risks deemed unforeseen.
A central legal issue remains who owns vehicle-generated data; according to Yahoudai and Davis so far manufacturers typically claim ownership of proprietary telematics information.
Davis emphasized drivers should know their rights regarding consent and protection of their own vehicle’s collected data: “Telematics can be powerful, but power needs guardrails,” he added. “We need stronger consumer protection laws around who owns the data, who can access it, and what they can do with it. Until that happens, drivers should assume their car is being watched at all times. Scary thought, no?”
