By Isha Marathe

Feb 26 - Allstate has said its Arity unit is a distinct legal entity from the insurance business and only collects and processes driver data with explicit user consent, in a response to Texas Attorney General Ken Paxton's data privacy lawsuit against the insurer.

Paxton's office filed a suit in January accusing the insurer of illegally tracking drivers by paying mobile app developers millions of dollars to "secretly" incorporate software that tracked the movements of Texas residents, comprising the "world's largest driving behavior database", with data on more than 45 million Americans.

Allstate then profited by using this telematics data to justify raising car insurance premiums or to deny coverage, or by selling the data to other insurers, Paxton's complaint said.

Paxton claimed that the software used to track this data was designed by Allstate's data analytics unit Arity and integrated into cell phone apps including Fuel Rewards, GasBuddy, Life360 and Allstate-owned Routely.

By doing so, Paxton said that Allstate violated the Texas Data Privacy and Security Act governing consumer data privacy, data brokers and unfair and deceptive acts by insurers. The state seeks restitution and other damages for consumers, civil fines of up to $10,000 per violation and the destruction of illegally collected data, according to the complaint.

Allstate responded on February 19 that the Texas suit hinges on two flawed arguments: that users did not explicitly opt in to data sharing and processing, and that Arity is in any way involved in setting insurance premiums.

"Contrary to the petition’s allegations, every consumer requesting an Arity IQ report or using an Arity-supported telematics application knowingly and voluntarily agreed to the use of their data, in many cases multiple times," Allstate said in its response.

"The Arity Companies do not sell insurance, collect premiums, or directly develop any insurance company’s rating plan, including that of any insurance company affiliates of The Allstate Corporation."

Essentially, Allstate argued that even though the attorney general's complaint might lump together the apps that track user data with Arity and the Allstate Corporation, they are all different programs, offered by different companies, using different data sources and collection methods, at different times, and for different purposes.

Allstate asked the Texas court to dismiss all claims against Arity and Arity Services with prejudice, find for them in affirmative defences and compensate them for any other relief, in law or equity.

"Consumers who choose to share driving data through Arity-powered apps can access emergency assistance, track fuel efficiency and unlock personalized insurance rates after a clear notice and explicit opt-in process," Allstate Corporation told The Insurer on Tuesday.

The Texas attorney general's office did not immediately respond to a request for comment.