Usage-based insurance is a recent development by auto insurers that is continuously growing. It is estimated that telematics will dominate auto insurance by 2020. The Strategy Meets Action (SMA) estimated that 75% of insurers believe usage-based insurance will fundamentally alter the auto insurance industry by 2020.
Usage-based insurance combines driving behaviors with premium rates for auto insurance. Mileage and driving behaviors are tracked using odometer readings or telematics. By combining a GPS system with on-board diagnostics, telematics monitors miles driven, time of day, where the vehicle is driven, rapid acceleration, hard braking, hard cornering, and air bag deployment. Telematics provides a list of vehicles showing the status of each. This information gives you the knowledge of fleet activities in one centralized, web-based interface.
The Driving Benefits behind Telematics include:
- Increased productivity
- Reduced labor costs
- Controlled fuel costs
- Improved customer service
- Increased fleet safety and security
- Reduced operating expenses
- Reduced unauthorized vehicle use
By monitoring the individual and current driving behaviors, this makes premium pricing more accurate and unique to each driver. With the real time information, consumers have the ability to understand how to adopt safety driving habits and reduce miles driven. Fewer miles and safer driving also helps to ultimately reduce accidents and control congestion. Telematics data also helps insurers to more accurately estimate accident damages and reduce fraud by enabling them to analyze driving data when an accident occurs.
Telematics is a critical technology solution to help in controlling premium costs for consumers, especially with commercial auto insurance premiums continuously increasing.
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