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Connected Car Telematics And Ubi
How will this evolution affect drivers and their insurers?
Telematics Technology Evolution
It started with very expensive telematics devices being hard wired into vehicles to get speed and location data. This led to the addition of accelerometers, engine diagnostic, and cellular modems to gather much richer driver behavior data in real time. This evolved into plug-in dongle telematics devices and then smartphone telematics. Today almost all new vehicles are wirelessly connected and provide very detailed data on driver behavior like lane departures, following distance, and crash alerts.
Connected Vehicle Telematics
For those new to the technology, connected vehicles have telematics devices installed by the vehicle manufacturer that tap into the engine computer to capture all kinds of data. Collected data includes location, driver behavior, engine diagnostics, to name a few. This data is then transmitted via cellular networks to the vehicle manufacturer. The vehicle manufacturers then partner with third parties, like auto insurance companies, to offer value-added products and services to vehicle owners.
... Vehicles & Smartphone Telematics for UBI
Auto insurers were quick to see the value of driver behavior data for underwriting and began using it to offer usage based insurance (UBI) over a decade ago. However, the costs and complexity of providing telematics hardware devices to insureds limited adoption. In the last few years, smartphone telematics eliminated these constraints, so now UBI adoption is growing rapidly. Now auto insurers are accessing connected car data that they hope will “drive” usage based insurance into the mainstream.
The next article in this series will describe how connected vehicle based telematics is disrupting auto insurance.
Connected Car Telematics and UBI (Continued.)
Connected vehicle telematics is disrupting how auto insurance is sold and what policyholders expect in terms of a personalized auto insurance experience. The depth of driver behavior data from connected vehicles is enabling insurers to better understand the exact driving habits that contribute to greater risk of losses and allows them to tailor premiums in ways that were impossible before connected vehicles.
Connected Vehicle Telematics Data
Today’s new vehicles have hundreds of sensors that monitor the vehicle’s systems and log how the driver is operating the vehicle. In additional to traditional driver behavior metrics like speeding and hard braking, connected vehicles also record new metrics that insurers can use for underwriting. These could include following distance, blind spot alerts, number or backing or left turn events, and others. Some new vehicles also look for indicators of driver fatigue and will warn the driver or automatically pull over.
Some vehicle manufacturers are disrupting insurance distribution by offering their own usage based insurance. They are offering attractive premiums based on very detailed mileage and driver behavior data. These policies are often bundled with the vehicle purchase and can be incentivized with extended warranties and other perks. Traditional insurers are responding by accessing connected vehicle data for UBI by partnering directly with vehicle manufacturers or vehicle data aggregators.
Policyholders Want More with Telematics
Policyholders’ expectations are also evolving with connected vehicle technology. Today many policyholders demand that premiums reflect their safe driving. They expect their vehicle to detect accidents and alert first responders. They want the vehicle to assess the damage and report it to their insurer. Then the insurer should notify the repair shop of the damage and schedule the repairs. All of this can be enabled by connected vehicle data.
The next article in this series discusses the use cases where legacy and smartphone telematics are a better option than connected vehicle data. Connected vehicles are not the only, or often the best telematics solution for every use-case. Smartphone telematics is a low cost and easy to deploy solution for personal and commercial auto insurers. To learn more about smartphone telematics click here: auto insurance telematics solutions
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