Moving from Pay-As-You-Drive to Pay-How-You-Drive
There is little doubt that auto insurance is evolving—and that it must. With gas prices on the rise, drivers everywhere are much more conscious of their auto-related costs, and insurance companies are having to get creative with unique cost advantages to attract new policyholders. In other words, we’re seeing carriers develop more complex predictive modeling schemes so they can not only reward drivers’ wallets in more discreet ways, but also avoid opening themselves to risk in the process.
How do they do it? The answer lies in M2M insurance telematics applications.
Traditionally, there have been discounts available to low mileage drivers, or drivers that stick to a very prescribed route every day (generically termed Pay-As-You-Drive), as well as the obvious safe-driver discounts for those with no standing accidents or speeding tickets. But these are very static metrics. What about the driver who travels just a little more than a given low-mileage cutoff, or drives extremely defensively as a rule but was merely unlucky in a speedtrap that one time. How can he or she prove consistent, safe driving habits to an insurance company?
We’re starting to see a second stage of coverage called Pay-How-You-Drive to encompass this, which introduces driver dynamics as a way to support the insurer’s actuarial calculations. This concept uses near-real time data collection by on-vehicle, M2M-enabled accelerometer devices. With this data, insurers can set premiums based on a more granular breakdown of a driver’s overall behavior.
Does the driver habitually accelerate violently, brake violently, change lanes quickly or often, violate speed limits (even if not caught by traffic enforcement), take risky sharp turns (without signaling no less!) or engage in high speed tailgating —in short, does the driver’s modus operandi carry more or less risk toward an eventual claim.
The result, and the benefit to the consumer, is that smooth, intelligent drivers can be more appropriately rewarded for conscientious driving.
KORE customer Agnik is an innovator in this field, and takes the concept to the next level so that folks don’t feel as if their insurance company is tracking them everywhere they go – as individuals. Insurance carriers never receive an individual’s raw driving data, but rather the data “scores” a policyholder’s driving within a set of well-defined policy parameters, maintaining the driver’s privacy while providing actionable data that can be analyzed and used for predictive risk calculations.
The question to yet be answered is – if a driver knows his/her driving behavior is being monitored and that good behavior is rewarded with lower premium and poor driving behavior resulting in higher insurance prices, does this affect driving behavior? I can see a whole host of psychological studies coming out of this innovative use of technology.
Just another example of M2M bubbling through to increase safety, lower costs and add actual, measurable value to people’s lives.
Robert Metzler, EVP Sales and Marketing
With over 20 years experience in leading winning sales teams, Bob joins KORE to drive adoption of KORE in the market by capitalizing on our unique service, management and billing capabilities, coupled with the most comprehensive and skilled network of partners, all dedicated to delivering the most reliable and relevant solutions for our customers, every day.