Future of Car Insurance with Telematics & AI
Telematics-powered auto insurance is a form of policy in which insurance companies rely on in-car tracking devices to monitor your driving habits and tendencies. These devices track your vehicle’s speed, mileage, total driving time and other factors to help determine the policyholder’s car insurance premiums.
In motor policy risk underwriting, insurance companies have historically considered attributes such as age, driving experience, driving record of the applicant, characteristics of the motor vehicle, current and proposed mileage, anti-theft, anti-lock braking systems, among other factors for the estimation of risk.
However, all of these attributes save for the first three, are more likely to help estimate the likelihood of the vehicle being involved in an accident rather than the estimation of the likelihood of the driver causing the accident; as these are attributes that do not represent how the driver performs on the road.
Telematics auto insurance protects your travel habits and sets your car insurance rates depending on how you drive. You will track your driving from your car’s black box, plug-and-drive system, or smartphone app. Your provider will monitor things like your driving pace, how you’re accelerating, and how you’re handling corners.
The proliferation of internet-of-things (IoT) based telematics devices, in the form of on-board diagnostic (OBD) devices or ML-driven mobile applications for telematics, have made it possible to capture the intricate details of actual driving behaviour on a real-time basis. These facilitate a more accurate estimation of a person’s risk while driving.
Telematics, and the AI analyzing this data, has ushered in the possibility of ultra-personalized driver risk scoring, which aims to present a more accurate view of a person
“Telematics is a rapidly developing field that’s not only fueled by our ability to analyze and apply data through Artificial Intelligence and Machine Learning, but also because we have so many more devices able to capture and communicate data in real-time from the vehicle to the insurer”- Greg Donaldson, Aite Group
In the past, insurers have relied on basic information about the vehicle and driver to craft a policy. With telematics, data gathered from transmitting devices paired with AI and ML work together to create a comprehensive risk analysis, helping insurers write more accurate policies.
The information collected is then used to assess your car insurance risk, help calculate the cost of your renewal premium, give safe drivers Bonus Miles each month, manage your claim after an accident and more.
Telematics is gaining much popularity as it takes car insurance from Pay-As-You-Drive (PAYD) to Pay-How-You-Drive (PHYD).One of the most powerful benefits of AI technology within telematics is its ability to provide real-time feedback to drivers, to help avoid accidents before they occur.
Some of the potential benefits include Accurate risk identification , Fighting insurance fraud , Decrease insurance costs.
The connected cars of today produce mass amounts of data that is changing the insurance industry. Thanks to this data, usage-based insurance (UBI) policies are becoming more popular.
References -
carinsurance.org
financialtechnologytoday.com
