First-time drivers can receive reduced insurance quotes by allowing their Facebook profiles to be scoured in a bid to determine their personalities, an insurer has announced.
Admiral had said an algorithm would be used to analyse Facebook profiles to determine whether prospective customers would be careful drivers.
But Facebook said accounts are only used for login and verification purposes.
A Facebook spokeswoman said: "Protecting the privacy of the people on Facebook is of utmost importance to us. We have clear guidelines that prevent information being obtained from Facebook from being used to make decisions about eligibility.
"We have made sure anyone using this app is protected by our guidelines and that no Facebook user data is used to assess their eligibility. Facebook accounts will only be used for login and verification purposes.
"Our understanding is that Admiral will then ask users who sign up to answer questions which will be used to assess their eligibility."
Facebook's policy puts strict limits on how developers can use the information that people share with them.
Louise Haigh, shadow minister for the digital economy, said the Government urgently needs to establish the parameters and ethics around the use of data on social media.
Ms Haigh, who has a background in the insurance industry, said: "We need to get ahead of the game."
Tom Jones, head of policy at law firm Thompsons Solicitors, said insurers want to play "Big Brother".
On its website, Admiral said: "New drivers are often quoted much higher insurance premiums as they have little driving history, zero no-claims bonus and are viewed as 'high risk'.
"But we want to help make sure safe drivers aren't penalised and get the best price possible. To do this, we'll look at your Facebook profile to help us get a better understanding of the type of driver you are.
"There's a proven link between personality and how people drive, and our clever technology allows us to predict who is likely to be a safe driver."
No one at Admiral was immediately available to comment.
According to an index from the AA, young drivers aged 17 to 22 face paying an average £1,286.96 for an annual policy. They pay the biggest premiums out of all the age groups.
Many insurers offer cheaper policies to young motorists who can demonstrate they are a good driver by having a black box fitted in their car to monitor their driving.