Safe young drivers are often unfairly priced out of car insurance and therefore owning a car simply because of their age. One smart device could provide the answer.
The manufacturing of cars, the logistics of getting them from the factory to the forecourt, and infotainment systems inside the vehicles have all been impacted by connected devices. The car insurance industry is perhaps the last piece of the puzzle.
Premiums based on actual risk
Advancements in mathematical modelling techniques have improved risk assessment models but the fundamentals of assessing future risk based on historical records and demographics haven’t changed in decades. Enter low-cost sensors with the ability to provide real-time data.
One of the key reasons IoT is being embraced in the car insurance industry is that the basics are simple to explain and understand to a non-technical audience. Simply put, in-car sensors can record massive amounts of information on vehicles and the people driving them. Insurers and underwriters can use this data to judge risk based on a much more individual basis than ever before.
Monitoring driving style with telematics
Car insurance premiums are typically set based on the type of vehicle, and the demographics of the driver. This meant that young people were charged higher premiums regardless of their ability to drive, while someone who’s been driving for years would pay less even if their complacency causes them to take unnecessary risks behind the wheel.
Some insurers today offer drivers the option of installing a small telematics device into a car’s diagnostics port. Typically located under the steering wheel, the OBD-II port has been included in every new car for about twenty years and is used by dealers during maintenance checks to access the electronic systems.
Recording how you drive
The telematics device records data such as the vehicle’s speed, distance travelled, time of day and the rate of acceleration and braking. By analysing this data, the insurer can determine the driver’s style and adjust the premium as necessary.
While it can’t be easily proven, some say that having the device makes you a better driver. There’s something to be said for the psychology of knowing you’ll have cheaper insurance rates, but the device can also sound an audible warning if the driver is accelerating or braking too hard.
Benefits beyond lower premiums
These telematics devices carry further benefits beyond a better evaluation of risk. When accidents happen, accurate data helps determine fault rather than relying on the often conflicting accounts of the drivers and eye-witnesses.
Knowing the speed, braking distance and other crucial data in the moments before the crash should help police and/or the insurance companies to determine exactly who was at fault.
Could GDPR boost telematics adoption?
Fleet managers have been among the first to adopt telematics devices. Not only can they reduce cost and improve safety, they can also provide valuable information as to why some issues keep recurring. But while such devices offer clear benefits, some fleet managers have reported driver resistance to the idea of being tracked.
Designed to catch data protection law up with the digital age, the European Union’s General Data Protection Regulation (GDPR) comes into force in May 2018. Among other things, the regulation gives data subjects the right to access – and delete – information held about themselves.
While it remains to be seen what impact it will have, GDPR should - at least in theory - ease drivers doubt about the collection and use of personal data.