The Future Of Auto Insurance: Telematics And Usage-based Policies In New York – Advances in connected vehicle technologies and the accessibility of personal mobile devices enable insurers to offer telematics-based services at scale. Leveraging telematics data opens the door to improving the customer experience, unlocking new revenue streams and increasing market competitiveness.
Vehicle data acquisition is not a new concept that has emerged with the development of cloud and connectivity technologies. This feature, called telemetry, has been available for a long time, but was only accessible by manufacturers or specialist parties, as establishing a connection to the car was not an easy task. For example, it was first used by Formula 1 racing teams in the late 1980s, and all they were able to manage were very short bursts of data as the car passed near the pits. Also, the variety and complexity of the data was significantly different compared to what is available today because cars were less complex and there were fewer sensors in the vehicle that could collect and transmit data.
The Future Of Auto Insurance: Telematics And Usage-based Policies In New York
At its most basic level, it is a way to remotely connect to vehicle data. More specifically, telematics is a linking mechanism between machines (M2M) made possible by telecommunications advances. Telematics understood in the context of insurance is even more specific and means connecting to data generated by both the vehicle itself and the driver.
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At first, as telematics-based products began to gain popularity, they sometimes required drivers to use additional devices such as black boxes that had to be fitted to the vehicle by a qualified technician. These devices are either mounted on the dashboard, under the hood, or plugged into the OBD-II connector. Black boxes were fairly simple devices consisting of GPS, motion sensor, SIM card and some basic software. They gathered basic information on:
Meanwhile, mobile apps have mostly replaced black boxes, as it didn’t take long for smartphones to become so sophisticated that they were pretty useless. Of course, it continues to be offered as an alternative by insurance companies to customers who refuse to install apps that access their location, or who need those apps because they don’t have a sufficiently advanced mobile device. However, most cars coming off the assembly line today have built-in connectivity features, so telematics functionality has already been integrated into the vehicle from the very beginning. For example, by 2020, 90% of Ford passenger cars will be connected. This means that additional devices are no longer needed. The vehicle is now able to share any collected data black boxes or applications, as well as many detailed data about the vehicle’s status from multiple sensors in the vehicle. More technologically advanced cars like Tesla can send up to 5 gigabytes of data every day.
By using new technologies, insurers can be closer to their customers, understand them better and take a more proactive approach to maintaining the relationship. Telematics is the basic technology that makes such a stance possible in the field of motor insurance. Insurers can use telematics to create a wide range of products and services, but it’s important to remember that regulations may differ from state to state and country to country.
Therefore, the solutions described in this article should only serve as an example of how the technology can be used.
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Usage-based products are probably the most common products in this category because they have been around for a while and offer customers the most tangible benefit (cost savings).
The market value of these products is currently estimated at $20 billion and is expected to reach $67 billion in the next 5 years. This is a good indication that there is increasing demand in the market, especially from millennials and millennials who expect the services and products they buy to be tailored to them rather than a generic quote.
Currently, the two main categories of usage-based insurance are Pay-as-you-go (PHYD) and Pay-as-you-go (PAYD) products. The first is based on the assumption that drivers should be rewarded for the way they drive. Therefore, when creating the PHYD offer, insurers need data about when and where their customers drive, their speed on different roads, how they accelerate and brake, and how they enter corners. Feeding this data into Machine Learning algorithms allows customers to be assessed as to whether they are law-abiding safe drivers and are rewarded with a discount on their premiums. The customer benefits are obvious, but the insurer also benefits from it. By enabling their customers to use PHYD products, insurers:
The second category is the PAYD model, where customers only pay for the vehicle they actually use, plus a low monthly fee. In this scenario, insurers only need to track mileage traveled and then multiply that amount by a flat mileage fee (usually a few cents). This type of solution is perfect for irregular drivers and was also the preferred solution for many during COVID. It can improve insurance affordability, reduce uninsured driving, and save consumers. It allows bonuses to more accurately reflect the damage costs of each driver and rewards drivers who reduce the risk of accidents. It can also be a great alternative to PHYD products for customers who are hesitant to collect multiple data points on their driving behavior.
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This solution allows insurers to be closer to their customers and react to events in real time. This is part of a larger trend where the evolution of technology has made possible the shift from a mode of operation where the insurance company is largely invisible to its customers (unless it’s something) to a new model where the company is there to support and help insurance companies. customers. Even go so far as to anticipate and avoid losses if possible.
It is possible to instantly detect accidents by analyzing vehicle data and driver behavior. Insurers may be the first to know that an accident has occurred by monitoring the vehicle’s location, speed, and sensor data (in this case, the motion sensor) and setting up alerts. But detecting the real crash requires filtering out random shocks and vibrations like speed bumps, rough roads and potholes, parking on the curb, slamming doors or tailgate.
This allows them to take a proactive approach and communicate with the driver, coordinating emergency services and roadside assistance. Using data from the accident, they can also initiate the initial loss reporting process and reconstruct the timeline of the accident. If more parties are involved, accident data can be used to determine who is responsible in uncertain situations.
The biggest advantage of telematics-based products and services is that they are beneficial to both parties and are easy to present. An example would be enabling stolen vehicle alerts. By collecting data on customer behavior, insurers can create driver profiles that allow them to set up alerts triggered for unusual or suspicious behavior.
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For example, let’s say a customer usually drives his car between 7 am and 5 pm on weekdays and then goes on various medium-haul trips over the weekend. That’s why an unexpected, high-speed trip at 3 a.m. on Wednesday might look suspicious and trigger an alert. Of course, there may be unforeseen events that force the customer to act in this way, but then the policyholder can be contacted to confirm if he is the driver and if it is an emergency. However, if verification fails, authorities can be notified and informed of the vehicle’s location in real time to help recover the vehicle after it is confirmed as stolen.
For fleet owners, geofencing rules can be created to increase fleet security. Most of the businesses with a fleet operate during certain working hours. Company vehicles are parked in designated parking areas at night. In other words, if a vehicle leaves a certain area at times when it should not leave, an automatic warning can be triggered. The fleet manager can then be contacted to confirm whether the vehicle is being used by the company or has left the property without permission. When necessary, theft can be reported to the authorities, and rapid rescue can be achieved by tracking the location of the vehicle.
Vehicle roadside assistance is a service that assists the driver in the event of a vehicle breakdown. Vehicle roadside assistance is an effort by automobile service professionals to sequence minor mechanical and electrical repairs and adjustments to make a vehicle drivable again. According to a single U.S. roadside assistance company, they receive 1.76 million distress calls per year, which translates to 5,000 calls each day. Obviously, any automation and acceleration of processes can have a significant impact on the effectiveness of operations and the customer experience.
By using modern technologies such as telematics, insurers can streamline the process from the moment the driver reports a breakdown to the insurer. The company can initiate a full process aimed at resolving the issue as quickly and with the least amount of stress as possible. Using the vehicle location, the tow truck can be sent without the need for a tow truck.