Car tracking insurance can be a bit tricky for the users at first.

An insurance company asks the users for their vehicle’s information in exchange for some saved bucks. The decision is hard to make since a large chunk of the population believes in securing their vehicle’s data (It’s always better to be cautious with what you choose to relay).

Snapshot Program by Progressive was the first one to introduce car tracking insurance in the US. The program worked on the principle of awarding premiums to the careful drivers, and later it started penalizing the bad drivers.

But how does an insurance company identify good and bad drivers? Car tracking insurance depends on the car’s information that a user opts-in to share with the insurance company while buying a car tracking insurance.

Companies usually make it a matter of choice to opt-in sharing the vehicle’s information.

If the user doesn’t want to share it, they can opt out of it.

Here’s how the tracking insurance works:

How does the Tracking Device Work?

With the signing up of a car tracking insurance, known as telematics insurance, the user installs a device to the car’s computer-based monitoring system. The mechanics decode error codes through that same system.

The current version of this system is called OBD II. What is it? On-Board Diagnostics II is your vehicle’s internal diagnostics monitoring system. It shows various error codes to warn you (or your mechanic) about a potential problem.

The OBD II is installed in vehicles that are manufactured in or after 1996. Before that, the OBD I protocols worked.

Another vehicle monitoring system that works for transmitting data is the On Smart System that sends the car’s data to many insurance companies through the car’s own data connection.

Coming back to the point, the tracking device is installed on the vehicle’s monitoring system to transmit data either to a third-party company that decodes it for the insurer or the insurer performs the task itself.

What Kind of Data Tracking Car Insurance Companies Receive?

The tracking device sends direct information about the mileage of your car, how fast (or slow) you drive it, your bad brake occasions, and even your nighttime drives. Based on this data, the insurance company gives you rewards.

‘Safe Drivers’ get benefits in the form of premiums. Reckless drivers have to pay more to the insurance company. As simple as that.

Telematics may seem like an evil plan, but it is not. In fact, such programs help the user control their overspeeding urges. You can save money only by being cautious on the road.

Risks Involved

When you opt-in for a car tracking insurance, you’re giving access to your car’s information to the insurer. Many of these companies do not disclose which parameters they can access. A lot of them make declarations about the car information they will receive.

However, there are reported instances, such as the one that happened with the Snapshot Program in 2015, when a researcher studied the tracking system to reveal that the user’s data was not encrypted and was prone to hackers’ attacks.

The company tackled this by showing confidence in their security system and investigating the matter to nullify the claims.

That leaves us wondering how safe this data transmission is for people who opt-in to share information.