Buying Data from Consumers: The Impact of Monitoring in U.S. Auto Insurance

Drivers in a voluntary monitoring program accept short-term tracking for potential discounts on future premiums. Using proprietary data from a major U.S. auto insurer matched with competitor price menus, we find that safer drivers self-select into monitoring and that those who opt in becoming 30% welfare gains, but take-up is low due to choice frictions, reclassification risk, and competition from cheaper insurers. Counterfactual policies that mandate data portability or restrict how the firm can price monitoring data would further reduce take-up and consumer welfare.