IoT Transforming Vehicle Operations & Insurance

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As we progress towards digital transformation and the mobile technology becoming more and more advanced and sophisticated, the ‘Internet of Things’ is certainly here to stay. Usage-Based Insurance (UBI) is one such an IoT innovation that aligns driving behaviours with premium rates for vehicle insurance. Mileage and driving behaviours are tracked using telematics device that gets installed in a vehicle or already integrated during manufacturing stage.

Telematics Technology

The concept of integrating telematics with vehicle insurance is primarily to drive monitoring of driver’s behaviour in near real time. These telematics devices measure a number of parameter such as miles driven, time of day, where the vehicle is driven, rapid acceleration, hard braking, hard cornering, air bag deployment etc.

The nature of data collected depends on the telematics technology used and the willingness to share personal data. The insurance companies then assess the data and charges insurance premiums accordingly. For example, a driver who drives long distance at high speed will be charged a higher rate than a driver who drives short distances at slower speeds. With UBI, variety of business models can be launched by insurance companies which will be beneficial to both the insurer and customer. 

The pricing with UBI typically varies from the traditional vehicle insurance. Traditional insurance depends on historical data to produce rating factors that include driving record, credit-based insurance score, personal characteristics (age, gender, and marital status), vehicle type, vehicle use, previous claims etc.

Premium discounts on traditional vehicle insurance is usually limited to the bundling of insurance on multiple vehicles or types of insurance, protection devices (like airbags), driving courses. Policyholders tend to think of traditional vehicle insurance as a fixed cost, assessed annually and usually paid for in lump sums on an annual basis.  

Channelizing the Usage- Based Insurance Intelligence

UBI has the advantage of utilizing individual and current driving behaviours, rather than relying on aggregated statistics and driving records that are based on past trends and events, making premium pricing more personalised and precise. UBI programs offer many advantages to insurers, consumers and society. In addition it also gives incentive to consumers for right driving behaviours.

IoT

Linking the insurance premiums to actual individual vehicle or fleet performance allows insurers to more accurately price premiums. This increases affordability for lower-risk drivers, many of them are also lower-income drivers. It also gives consumers the ability to control their premium costs. Insurer need to incentivise them to adopt safer driving habits. Safer driving also helps in reducing accidents, congestion, and vehicle emissions. 

The use of telematics helps insurers accurately estimate accident damages and reduce fraud by enabling them to analyse the driving data. This additional data can also be used by insurers to have more differentiating UBI products. The data can also help the insurance company in faster claim settlements.

Additionally, the safety benefits offered with many telematics UBI programs also help to lower the number of accident and cases of vehicle theft related costs by improving accident response time, allowing for stolen vehicles to be tracked and recovered, monitoring driver safety etc.

UBI can also help car owners understand and track where his/her driver parks the vehicle. One may also track if the vehicle is parked in a parking or no-parking zones. How consistent is the driver in car servicing? It can also help in finding the traffic rule violation. Moreover, UBI also significantly supports in filing of accidents and proactive response from the insurance company.

UBI has opened up new avenues for other organizations and enterprises to integrate new business models with the big data being generated with a common objective of developing a sustainable business and society. While such a solution is available in India, it is expected to take some time for the technology to make a mark and gather wide acceptance in the Indian market before it is commercially made available and launched in India.  

[Disclaimer: The views expressed in this article are solely those of the authors and do not necessarily represent or reflect the views of Trivone Media Network's or that of CXOToday's.]