What is Insurance Telematics and how will it impact on Car Insurance?
Earlier this week we decided to develop a section of content on the Arrive Alive road safety website to provide information on why the increased interest in usage based car insurance is also important for road safety. This was done after discussions with the organizers of an insurance telematics conference in Europe and gaining some interesting insights on this fast growing industry.
We have previously given attention to vehicle technology and vehicle telematics in the discussions pertaining to fleet management, but this was never done with a focus to the benefits for car insurance as well!
There is a clear and direct relationship between vehicle telematics and the benefits they are able to provide to the insurance industry in measuring and reporting on driving behaviour.
Why is vehicle telematics so important for insurance companies?
Insurance is all about measuring and calculating risk. Insurance companies evaluate the level of risk and then set premium rates and coverage per the measurement in question. Vehicle telematics is the best, most effective and scientific way to limit risk.
Data on the safe driving of vehicles have allowed fleet managers for a number of years to better manage their fleets of vehicles and retain the best drivers. This have saved vehicle fleet owner millions in maintenance cost and fuel costs and also allowed them to increase productivity.
It is only logical that the same data on driving behaviour would also be important for car insurance companies!
What knowledge about driver behaviour would be most important to insurers?
* Insurers need info to measure risk by knowing what kind of driver is driving the vehicle.
* Do they drive the speed limit or race around town? How many times are they guilty of exceeding the speed limit?
* Do they gun it when they see a yellow light or slow down and stop?
* Is the driver prone to excessive cornering or braking?
* Where is the driver driving? Does he travel on the main roads or does he frequently enter hazardous areas?
* How far is the driver driving and at what time is he driving the vehicle?
An insurance company seldom knows the answers to these questions. With insurance policies developed with vehicle telematics in mind insurers can gain access to this information.
Usage Based/ Pay As You Drive / Insurance Telematics
In the past car insurers only asked basic information to be disclosed. This included questions on driver and vehicle characteristics, use of the vehicle and geographical location. Premium calculation depended simply on type of vehicle, horsepower, sales price, age and sex of the driver, and where he or she lives.
Vehicle telematics now allows for usage based car insurance where technology is an important component in calculating insurance premiums. With vehicle telematics car insurance premiums are determined by actual performance on the road. Telematic devices transmit real-time driving data to insurers, who can then gain a more accurate picture of driving behavior and use this to set fairer rates for law-abiding, fuel-conscious drivers.
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