Built-in tracking devices are transforming the way that rates are calculated for drivers.
Traditionally, insurers have used a motorist’s age, gender, address, and other demographic information to calculate the premiums an individual would pay for coverage, but usage based insurance is now changing that pricing model to include driving skills and behaviors.
These increasingly popular devices and programs are starting to transform the monthly bills.
Now, instead of basing rates on risks that are calculated using historical data regarding the group into which an individual driver falls, his or her actual behaviors behind the wheel will be incorporated into the premiums that are paid. Usage based insurance takes into account factors such as how often a car is driven, where it is taken, and how it is used.
Some usage based insurance devices track specific driving behaviors, not just overall use.
For example, depending on the program, a usage based insurance telematics device may report the number of times a driver has to brake hard, the speeds that are reached, how often left and right hand turns are made, and other specifics.
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At the moment, these programs are being used in conjunction with traditional premiums calculations techniques in order to reward drivers for good behaviors. However, many people in the auto coverage industry are seeing a future where the entire pricing model will have changed in order to more accurately reflect the actual risk of an individual motorist.
Currently, premiums can also include a number of additional factors, such as the number of uninsured drivers within a certain region, or the coverage laws in a state, as it drives up the possible risk for all drivers when payments on claims are more expensive, or when an at fault motorist may not have coverage. However, usage based insurance could change the way the entire industry is currently functioning.
According to a Property Casualty Insurers Association of America’s senior director, Bob Passmore, “There’s always been a lot of competition for auto insurance.” He added that “I think the way that insurers do business, and the way that they advertise their business, has changed.”