Auto insurance companies are quickly finding that the Internet of Things is not only beneficial to their profit margins, but also that the technology is attractive to consumers.
IoT is enabling Usage Based Insurance (UBI), which, if you drive well, means lower insurance premiums. The potential cost-savings makes these programs — offered by Progressive, State Farm and others — alluring. On-Board Diagnostic dongles are the most common way companies monitor their customers’ driving habits. The devices send data to the insurer, which can then determine the quality of the driving.
A recent Business Insider report predicts that by 2020, more than 50 million drivers in the United States will have tried UBI insurance. Insurers are hoping that will result in lower claims costs. But if there are more customers, how does that translate into lower claims costs?
The drivers who opt for UBI are better drivers, typically with clear records. Because they are more apt to follow the rules of the road, they are more apt to sign up for a program that rewards them for their good behavior.
How Intel Telematics Design Architecture works. (Diagram courtesy of Intel.)
Commercial companies, such as limousines and taxis, are also looking at ways to reduce insurance costs. This week, a new partnership between Intelligent Telematics and Commercial Hirecar Insurance Company offers a way for the insurer to offer more attractive premiums, and drivers an increased level of safety, via the IoT.
Intelligent Telematics’ IT1000 3G forward-facing camera has a built-in battery back-up and 3G modem that is to be installed on the livery car. In the event of an accident footage is captured and transmitted from the device within moments — even if there is a power outage. Richard Baxendale, president of Intelligent Telematics, said in a statement: “Our IT1000 device will not only reduce claims ratio and cost of insurance, but will also enable CHIC to offer its new and existing clients even better terms than they currently enjoy.”
Insurance carriers can use telematics to attract more low-risk drivers to their customer bases, and using the information generated to offer more competitive pricing. In addition, a telematic solution raises the profile of an insurer as one that is more tech-savvy. Solution providers can help insurers craft a telematics program that includes:
- careful planning and testing
- attention to customer relations
- attractive pricing
- effective use of data analytics
Insurance providers are looking now to implement UBI programs. Solution providers who get involved early will have an advantage over those who delay, thereby risking losing clients to their more innovative competitors.