One of my buddies as of 2007 could not get over his disbelief that people shopped online. He was not technologically unsophisticated; indeed, he knews more about the various flavors of PGP and how to send private messages without using encryption than I care to inquire about (no doubt as a result of doing more than a bit of contested business in Russia). He thought it was crazy to give up that much personal information to anyone unless absolutely unavoidable, and certainly not a mere retailer. Cheaper online prices weren’t enough of an inducement for him to make that trade. (I have no idea whether he has changed his mind as of 2012; being a spooky sort, he’s done a disappearing act).

Like it or not, you in the not too distant future are going to have to submit to personal surveillance to get many types of insurance and financial products. And that future is closer than you probably realize.

Matt Stoller wrote in the spring about how the info tech industry is pushing the idea hard and finding a receptive audience:

Profit-driven surveillance does not starts and stop with young adults. It is, in fact, becoming pervasive. The main theme of a recent IBM consulting document on the future of the insurance industry is how much more money an insurance company can make if it tracks and tags its customers. This is particularly true for auto insurance companies, some of whom like Allstate and Progressive are experimenting on new technologies. For instance, IBM suggests that “A “pay-as-you-live” product would trade some location and time-of-day privacy data for lower insurance bills overall.” IBM is recommending these companies stick a sensor in your car, measure where you go and when, your speed, acceleration and deceleration, etc. The progression over time could be to withdraw traditional insurance products, so that you won’t be able to get an insurance product without sensors attached. As this presentation offers, “The aforementioned rising tide of technology also empowers insurance underwriters to bring their products closer to realtime interaction via sensor networks and enlightened privacy regulations.”… It’s not just sensors in your car – insurance companies are modeling tighter and tighter risk chunks. IBM goes on, saying that new products “will facilitate “just-in-time insurance” as a person moves through a set of “spaces.” Each step of the journey represents a different risk such as car-to-train-station, train-to-city-station, station-to- office, and so on. Each leg of the trip truly represents a varying amount of risk.” Tracking these movements could require nothing more than downloading an app on a smart phone, or some other device. But it is literally the application of financial engineering to your very liberty, or the toll-boothing of your life.

That future is arriving sooner than you might think. The New York Times cheerfully ignores the privacy implications of having a monitoring device installed in presenting surveillance as a benefit: yes, you can PROVE you are a good driver by letting your insurer snoop and he’ll reward you with a better rate. And this idea will probably get tons of takers, since 93% of all drivers thinks they are above average. Here is how the Times makes this plan sound non-threatening. Headline: “So You’re a Good Driver? Let’s Go to the Monitor”

LAST week, under my car’s dashboard, I installed a small wireless gadget that would monitor my driving. I wanted to see how it felt to have my driving behavior captured, sent to an insurance company and analyzed. More drivers, seeking discounts on auto insurance, are voluntarily doing just that…. Driving data is collected with a device that policyholders must be persuaded to install; it connects to the car’s computer system via a diagnostic port found in all cars since 1996. Such “user-based insurance,” the name for individualized pricing based on data collected from a vehicle, is spreading. Drivewise from Allstate is in 10 states; Drive Safe and Save, from State Farm, is in 16, with 11 more to be added next month; and Snapshot, from Progressive, is in 43…. The Snapshot device records the time of day and distance traveled, along with the vehicle’s speed, second by second. But Progressive deliberately left GPS out of the device so the car’s exact location is not known; otherwise, more drivers might be nervous about using it…. The day after I installed it, I could log on to the Drivewise site and see graphs showing miles driven, the number of incidents of “hard braking” and “extreme braking” sensed by an accelerometer, how many miles were driven at more than 80 miles an hour, and the number of miles driven at what times of day or night. That is all. The device is semiblind by design. It does not know what road I’m traveling or whether I’m stopping for a red light. It also remains oblivious to whether I’m going 70 miles per hour in a 30 m.p.h. zone. Allstate says the lowest-risk time for accidents is 5 a.m. to 11 p.m. on weekends, with the highest risk from 11 p.m. to 4 a.m. on weekdays and 11 p.m. to 5 a.m. on weekends. So I couldn’t earn the maximum discount if I worked at a job that put me on the road in the highest-risk times. “There is a very strong correlation between the driving behaviors we’re monitoring and accidents,” Mr. Birchfield says. Allstate says the discount for its participants also averages 10 percent. I had thought I’d be uncomfortable knowing that the Drivewise gadget was accompanying me everywhere, But that wasn’t the case — perhaps because my driving behavior was translated into charts with innocuous titles like “miles driven” and “braking events.” The data can be used in post-accident investigations and litigation, however, so I wonder how innocuous it would all look in court in the hands of a plaintiff who has sued me.

Now this doesn’t sound that bad, right? Not that much data is collected. But a buddy who runs a small insurer is vehemently opposed to the idea precisely because he has heard both from other insurers and tech vendors where this is going.

The entire strategy is to go at this incrementally. This is now a cost savings pitch to drivers who think they are good and don’t mind what looks like a little bit of monitoring to get a price break. But let’s say you are like my privacy conscious buddy, you don’t care, there isn’t a price break big enough to get you to agree to surveillance. Well, guess what? Now the monitoring is to prove you are a good driver. It will then be offered to various higher risk groups, again for price breaks, to carve out the better drivers (say the notorious men under 25, or people who’ve been in accidents). The remaining unsurveyed driver will be in a pool of largely higher risk drivers, so their rates will be higher than they’d have been earlier, encouraging even drivers who aren’t confident in their abilities to get scored. By the time all that segmentation is done, the remaining pool will be small and largely high risk. The insurers can then require them to get monitored as a condition of getting insurance.

And once the surveillance is accepted in this and other areas, rinse and repeat on pushing the margins out: say maybe if you are speeding near certain designated high risk areas (query what those might be) entailing limited use of the GPS. And once that has started, it won’t be long before full tracking is required to get auto insurance. Stoller suggested where this is going, based on the plans of vendors who developed these technologies to track prisoners to find profitable opportunities to use them on the general population: