Will IoT Make Usage-based Car Insurance the “New Normal?”

Ken Connor


The phenomenon of usage-based insurance (UBI) is really starting to make waves as a way for automobile insurers to boost their customers’ experience through rates that better align with driving behavior and mileage statistics. As adoption rates go up, we can attribute growth to two main factors: advances in technology and a clear value-add for both insurers and consumers.


In 2014, the LexisNexis Insurance Telematics Study explored consumer sentiment around UBI, and came to the conclusion that safety-related aspects were the primary driver. Consumers stated a clear preference for more wirelessly-enabled roadside assistance and emergency response products. Respondents also expressed a growing comfort in sharing personal driving data in exchange for the benefits associated with UBI.


At the same time, Garner predicts that by 2020, approximately 20 percent of all vehicles will be connected to the Internet. While the “connected car” opens the door to a range of potential features—some having more sizzle than steak to be sure—the tangible ROI it can bring to insurance providers and safe drivers via UBI is not to be taken lightly.


One good example is KORE customer Metromile, a leading light in the adoption of UBI. Metromile found that 64 percent of drivers pay higher premiums to subsidize the minority who drive the most. Since the risk indicator for drivers is based on quantity of miles traveled, it reasoned, Metromile seized on a tailor-made opportunity to help drivers pay less for their insurance. Today, on average, the company says it saves each of its customers more than $500 per year!


KORE provides the seamless connectivity for Metromile Pulse, the key to the company’s per-mile insurance. The small wireless device plugs into a car’s diagnostic port to securely count customer miles. Subscribers then see their insurance premiums take a simple, per-mile, format.


Advanced UBI capabilities can track a remarkably wide range of high-value information, such as when and where the vehicle is driven, acceleration and braking habits, and more. Insurance companies can monitor and analyze this data, and then create personalized behavior-based rates for each driver. If they want to go even further, insurers can turn to advanced GPS tracking platforms, such as KORE Position Logic, to provide detailed analytics about operator driving habits. For professional driving operations, such as delivery fleets, these kind of metrics become invaluable to the bottom line.


In short, insurance companies are coming to rely more and more on user-behavior profiles as opposed to traditional actuarial tables to analyze risk assessment and calculate insurance premiums. These observable and quantifiable behaviors formulate a risk profile that helps insurance companies rate drivers with extreme accuracy, and price insurance offerings based on reality rather than probability.


Significant technology advances, combined with growing consumer acceptance and demand, could bring about a day sooner than later where UBI is the rule, not the exception. KORE powers many leading insurers and has the 3G, 4G and LTE connectivity required to keep assets connected in real-time for complete risk profile management. Safe drivers will continue to be rewarded with reduced rates, and insurance providers can keep pushing the envelope toward a personalized customer experience in any industry that, for time immemorial, has been “all business.”

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