26 Jun 2017
Imagine a future where you will decide and control the insurance pricing for all of your lifestyle needs. No longer will the insurer pre-determine your insurance premium. With telematics, it is not all impossible. Insurers have already taken the plunge, some utilising wearable fitness trackers to reward policyholders for healthy behaviours.
Through telematics, insurers are able to turn data into customer insight and action, lending greater transparency in terms of insurance pricing. This is slowly happening in motor insurance which is traditionally based on rating variables such as the driver’s profile, driving record and vehicle type. If you are a young and inexperienced driver, chances are you will be quoted a higher premium. With telematics, this traditional pricing scheme is now placed in the hands of the driver.
Lower-risk drivers can improve the affordability of their premiums, and not be subjected to traditional pre-determined pricing. In turn, their motor insurance premium is rated based on distance driven or driving behaviour behind the wheel. Such plans incorporating telematics are better known as Usage-Based Insurance (UBI).
To collect and monitor real-time driving data, insurers adopt either a plug-in device (black box) or a mobile phone app. Telematics technology rely on GPS to track journeys, time on the road, speed, cornering and braking. These data are also transmitted and shared with the consumers who can then view them online or on the app. This provides instant feedback so they can make needed adjustments to improve their chances for better discounts.
Because UBI relies on actual ongoing behaviours and not past events, insurers can provide a more personalised insurance policy. Telematics technology has also enabled insurers to broaden offerings by allowing drivers to review their fuel usage, be alerted on car maintenance needs and support in terms of crash notification or vehicle location.
In the scheme of things, telematics can help consumers to limit their risk exposures, paving the way for less accidents and congestions on the roads.
As data collection and analysis accelerate over the next few years, the savings to the consumers could end up being far greater. In exchange of privacy, consumers are the ultimate winners.