The adoption of GPS technology for underwriting processes in the automotive industry may present potential security concerns.

While wrong use of data in areas such as home insurance could have an unforeseen adverse effect - affecting house prices, for instance - the same ambiguity can also be found in the automobile insurance space.

In that segment of the insurance industry, GPS is being used to monitor excessive speeding of commercial drivers and detect route variations that may be inappropriate.

Supermarket chain Tesco, for example, is introducing GPS-based systems to its fleet to control and assess fuel usage and vehicle activity against delivery schedule as well as driving style.

But despite its apparent attractions, management of the technology represents a challenge to businesses, said Martha Bennett, research director for financial services at analyst Datamonitor.

"The question is, how do insurers ‘draw the line’ when the driver switches off the system – do they switch it off legitimately because they are on their lunch hour, or do they do it deliberately because they are about to commit a crime?”

Data security should be carefully handled in services such as pay-as-you-drive insurance, said Bennett.

In such schemes, GPS-based systems are used to assess premiums to be paid by insurance companies depending on whether cars run on accident-prone areas, but there is also the potential risk of privacy invasion.

“Other points of debate include the right for police or government agencies to ask for such data and how long the data should be kept if they ask for GPS records from insurer, because there is reason to believe a vehicle has been used for a crime,” said Bennett.

But future uptake of GPS technology by insurance companies will be influenced by the cost of supporting systems.

“Cost is directly linked to factors such as whether companies already have geodemographical systems in place and how they want to carry out integration,” said Bennett.

“Since GPS technology is only useful when you have both the satellite and the ground elements in place, a crucial question is where do these companies get the infrastructure from,” she said.