Buying Data from Consumers: The Impact of Monitoring Programs in U.S. Auto Insurance
Consumer data is increasingly available to firms through private exchanges. We study a voluntary monitoring program by a major U.S. auto insurer, in which drivers accept short-term tracking in exchange for potential discounts on future premiums. Using a proprietary dataset matched with competitor price menus, we document that safer drivers self-select into monitoring, and those who opt-in become yet 30% safer while monitored. We then model the forces of supply and demand shaping the amount of information revealed in equilibrium. We find large profit and welfare gains from introducing monitoring. Requiring the firm to make monitoring data public would have reduced short-term welfare.