A growing number of auto insurers are offering telematics programs.
As the popularity of usage based insurance grows among both auto insurers and consumers, the data that is provided through the telematics devices is helping to provide more accurate information regarding the risks associated with a certain driver, so that pricing can better reflect that actual risk.
This approach is already in place in many parts of the United States, Canada, Europe, and Australia.
At the moment, the most common usage based insurance programs in North America are in truck fleets, but this option is now making its way to the consumer marketplace, as well. Some insurers are allowing their customers to install the small devices in their vehicles so that they can see if they qualify for certain discounts based on the safe use of their cars. For those who are eligible for discounts, the reduction in premiums can be as high as twenty or thirty percent.
Insurers are looking to usage based insurance as a much more accurate way to underwrite risk.
Usage based insurance opens up an entirely new world of data for insurers to consider, and could potentially turn the underwriting model on its head if it reaches the point that it is used in a much more widespread way. This is because insurers will be able to identify which drivers are taking part in riskier behaviors that have an increased likelihood of resulting in an accident over time. This can also help to discourage drivers from continuing those behaviors before problems occur, as they know that they are being monitored and that they will have to pay for those behaviors regardless of whether or not they actually result in a crash.
Information provided to insurers through these usage based insurance devices include speed, braking hard, changing lanes abruptly, accelerating rapidly, number of miles traveled, and others.
This is allowing the industry to use a much more predictive underwriting model. It gives insurers the ability to charge premiums that much more accurately reflect the likelihood of a truck fleet or of an individual driver to be involved in a crash. Though this is beneficial to insurers, it is also highly valuable to drivers, who will be rewarded for their safe driving behaviors, will be able to alter their riskier behaviors in order to save money and keep themselves safe, and will help to encourage better safety on the road in general because there will be fewer people choosing to drive in a risky way because they will have to pay more for it.