Watch any TV show, and you will find yourself bombarded with a seemingly endless amount of car insurance commercials. Many are funny, with lovable characters telling consumers how their offering is less expensive than the next. While the savings from one provider to the next may be negligible, significantly lower insurance rates may be coming soon, thanks to IoT and telematics.
Researchers learned that approximately 64 percent of drivers pay higher premiums to subsidize the smaller group who drive the most. Since a key risk indicator is based on quantity of miles traveled, there is an opportunity to reduce rates for most customers.
Usage-based insurance (UBI) is made possible with vehicle-based IoT sensors that report mileage information. These small, cellular-connected devices measure driving risk factors including distance driven, time-of-day driving patterns, speed, braking patterns, and erratic driving behaviors that could lead to accidents. These observable and quantifiable behaviors go into a risk assessment that helps insurance companies rate drivers on safety, enabling them to price their insurance based on the risk profile of the individual driver.
With UBI, insurance companies monitor and analyze this data, and then create personalized behavior-based rates. For safe drivers, infrequent drivers, and those who just make short trips around town, it could mean drastically lower insurance costs. For professional transportation businesses, such as delivery fleets, these metrics become invaluable to the bottom line.
UBI has been in development for many years. According to Intelligent Mechatronic Systems (IMS/Intellimec)*, UBI 1.0 was architected by insurance companies to attract low-cost drivers. We have now entered the era of UBI 2.0, which is a more customer-centric approach. IMS/Intellimec reports that UBI 2.0 includes many different touchpoints with their preferred provider, including driver coaching, vehicle emissions reports, and automobile health updates.
As consumer demand for UBI is expected to increase, the time is now for auto insurance companies to begin developing technologies and policies. SMA Research reports that as many as 70 percent of auto insurance carriers may be rolling out UBI offerings by 2020.
Ready to deploy a UBI solution? KORE can help: Learn more.