State Farm has developed plans to collect customer data, allowing advertisers to create highly targeted pitches based on where, when and how people drive.
In a patent application filed with the U.S. Patent and Trademark Office, State Farm proposes gathering information about drivers’ routes and stops from vehicles’ sensors, navigation systems, cameras or other devices.
State Farm would send data on driver’s habits to “another unit or entity,” such as an advertising agency or vendor, and the agency would use this data to send the driver targeted radio or email ads. As the application explains, drivers might receive an ad for “Restaurant A” if they regularly visit similar restaurants.
“Advertisements are most effective, and provide the greatest return on investment, when targeted to the appropriate audience,” the application notes.
State Farm declined to comment on the patent application.
When asked whether the company currently provides customer data to third parties, State Farm pointed NerdWallet to its privacy statement which says, in part, “We share information about you with companies that perform marketing or other services for us or with whom we have joint marketing agreements. These agreements allow us to provide a broader selection of insurance and financial products to you.”
A State Farm spokesman said that the company does not sell customer information.
Jeri Smith, CEO of Communicus, an advertising consultancy with offices in Arizona and California, says that the customer data described by State Farm “is extremely valuable. The whole advertising industry is moving more and more toward highly targeted advertising.“
“As implied by these patents, advertisers are looking to find exactly the right people at exactly the right time,” says Smith. She notes there’s a lot of “waste” in current advertising models — for example, a 60-year-old man is not the best target for ads about baby products, but might see them while watching broadcast TV.
State Farm could offer a massive audience for targeted ads: As the nation’s largest auto insurer, it holds 19% of the private passenger auto insurance market and services nearly 44 million auto insurance policies.
While some drivers might be annoyed by highly targeted ads or disturbed by the thought of being tracked by an auto insurance company, younger drivers are often more receptive to ads based on where they are and what they do.
“Millennials are more comfortable than older generations with advertisers having access to their personal data,” Smith says. “Consumers will tell you they appreciate relevant messages and are willing to sacrifice privacy in many cases for more relevant advertisements.”
The bigger picture
The patent application is no guarantee that State Farm will ever sell customer data, but it might be part of a larger strategy to price auto insurance policies with detailed customer data. As NerdWallet previously reported, State Farm has also filed a patent application that describes trip-based car insurance, in which each car trip and its related “risk” could be priced differently. For example, insurance for a trip by a teen driver on a rainy day would cost more than insurance for an errand by a middle-aged driver on a sunny day.
Both ideas rely on the sensors and processors being built into the new generation of fully or partly autonomous cars. The technology that could make cars safer could also give insurers new insight into daily habits of customers — and a potential new revenue stream.
Ads for slow drivers?
Even your driving style — which your car would also track and record — could help determine the ads you receive. State Farm says, “It may be known that drivers who have a particular driving style (e.g., heavy brake usage, frequently driving at a relatively high or low speed, etc.) tend to be more or less receptive to certain advertising styles.” Or that drivers who take longer routes to avoid traffic congestion may prefer certain products and services.
But targeted advertising can also backfire, Smith notes. She points to targeted online display ads based on previous searches. If you’ve searched for bedsheets, for example, you might see ads for sheets on other websites, even if you’ve already made your purchase. “It can come across as annoying,” she says.
Updated July 17, 2015
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