How telematics may change driver behaviors.
Usage based insurance is on the rise, and it is showing no signs of slowing down as it combines telematics with GPS technology and onboard diagnostics to help insurers to better understand the behaviors of their policyholders while behind the wheel.
Though the impact on price is starting to be understood, what has yet to be seen is the impact on drivers.
The technology is able to tell an insurance company where a car is located, how fast it is going, how many left or right turns it makes, how often it brakes hard, and other forms of behaviors. Some can even tell how many hills are driven. In fact, it is a similar technology to that used by Formula One drivers to see where other racers are located on the track.
Insurers are implementing the usage based insurance technology to gain more accurate risk data.
The programs are being marketed to safe drivers as a way to decrease their monthly premiums. Some programs provide an automatic discount of up to 10 percent off monthly payments simply for signing up. Others are advertising that coverage costs can drop by as much as 40 percent for truly save motorists.
The technology for usage based insurance truly took off in Europe as a response to the new law by the European Court of Justice, which stated that by the end of this year, gender can no longer be factored in to a rate calculation. Insurers found themselves in need of a new way to accurately assess risk so that good drivers would not be faced with skyrocketing premiums as a result of the change.
Many are hoping that aside from the opportunity to save money, drivers will also see this as a way to have direct control over how much they pay for their coverage, and will use their usage based insurance telematics to help themselves. Insurance companies, drive safe programs, law enforcement, and concerned road users could all benefit if drivers slowed down, left more room between themselves and the driver ahead, and carpooled to put fewer miles on their vehicles, making the roadways safer, and less expensive to use.