Telematics Based Insurance Using Driving Data & Driver Behavior in Connected Cars to Predict Accident Risk & Claim Frequency; Offer Cheaper Policy Rates;

SITUATION:
User Based Vehicle Insurance is growing market in risk management.
Driving data from connected cars providing actual mileage use & behavior.
Data from new financial technology impacting underwriting rates from insurers.
Real world driving data & driver behavior being gathered by auto insurers.
Underwriting model prompts number of new startup underwriters to lead the way.
Change to data based risk underwriting is slow over concern for privacy.

SIGNIFICANCE:
Much uncertainty by policy holders- Survey identified a lack of education on telematics.
Also privacy concerns & misconceptions about costs savings of UBI programs.
UBI offerings are from turn key to white labeled benefits & cobranded solutions.
Scoring & remediation services augment existing vehicle underwriting data.
Underwriters seek to build a scoring of driver behavior safety model.
Will enable accurate predictions of usage for establishing insurance rates.
GM & others are entering the vehicle insurance market.
Apple & Google monitoring the market and added services. Banks, too.

SOLUTIONS:
Overtime driver data will enable insurance underwriters to more accurate assess risk.
Insurance companies & startups investing heavily in new digital services.
Underwriters offering cheaper, discounted rates for safe & infrequent drivers.
Some Insurance companies are bundling auto and home policies.
Startups like Root Insurance has raised $ 724 M in initial IPO.
UBI programs collect vehicle “telematics” data from cellular, GPS or other technology.

Programs from the Underwriters track certain driving behaviors such as:

  • Speed
  • Acceleration
  • Hard braking
  • Hard cornering
  • Miles driven
  • Time of day
  • Phone use while driving

STATS:
Size Active Telematics Based Insurance Portfolio:
U.S. = 13.5 policies in 2019
14% UBI Market penetration by 2024

SOURCES:
“Data is a Help & a Hazard for Auto Insurers” WSJ  December 2020 – https://www.global-asset-mgmt.com/driver-data-is-a-help-and-a-hazard-for-auto-insurers/

“Usage-Based Insurance Rewards Good Drivers” – https://www.forbes.com/advisor/car-insurance/usage-based-insurance/

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