Pay-per-mile insurance has garnered a lot of attention in the insurance world, with drivers seeing it as a useful alternative to traditional plans.
For drivers who rarely use their vehicle, pay-per-use options offer a way to save money. Pay-per-mile providers say this type of insurance results in fewer emissions, less traffic, and lower demand for parking.
With the Internet of Things (IoT) technology on the rise, and especially coupled with 5G connectivity on the horizon, pay-per-mile insurance is improving in ways beneficial to both drivers and providers.
Telematics create new forms of vehicle insurance
WANT TO BUILD A FINANCIAL EMPIRE?
Subscribe to the Global Banking & Finance Review Newsletter for FREE Get Access to Exclusive Reports to Save Time & Money
By using this form you agree with the storage and handling of your data by this website. We Will Not Spam, Rent, or Sell Your Information.
Telematic devices installed in vehicles can track numerous factors that go into pricing new insurance models. These devices can track GPS (location of vehicles), braking levels, airbag deployment, speeding, and more. Insurance providers can not only see how many miles users drive, but they can also gain insight into how well they drive. With this technological innovation, providers are releasing options such as pay-as-you-drive, pay-how-you-drive, and pay-as-you-go models.
5G technology will make many IoT systems faster and able to collect more data from more users in real-time, and the car insurance industry is set to benefit greatly. This data from telematic devices will include more performance-based metrics, which will completely revolutionize how insurance prices are set. Instead of relying on past driver behavior, providers can look at current driver behavior for information on a specific individual.
Gaining popularity now is mobile telematics, which captures data using a smartphone instead of vehicle’s on-board diagnostics or OBD-II port, more specifically sensors inside smartphones. This technology can provide safety features such as no texting policies. Insurance providers will be able to see if their drivers are texting or calling while driving, which gives drivers incentives not to become distracted when behind the wheel.
Telematics, AI, and IoT help fraud detection
On the insurer’s side, fraud is a common challenge across all industries. Telematics, however, change the game in limiting “soft fraud” or when claimants try to exaggerate what happened; instead, the data speaks for itself.
Furthermore, the data gathered from telematics can help create more accurate claims assessment. This will help file claims reports faster, getting results to customers quickly.
In the housing insurance world, AI insurance startup Lemonade paid out one claim in three seconds. Will the auto insurance world follow suit? Will claims reports become that much faster? Before that can happen, insurers must address the challenges ahead in usage-based insurance (UBI).
Addressing the challenges of usage-based insurance
What developers and insurance providers must do is address the security and privacy concerns for UBI programs. Certain states implemented legislation that requires companies to disclose tracking practices and devices, so customers know what data is collected about them and when. UBI models need to find a way to manage regulatory concerns on a state-by-state level and remain open and transparent with customers on data collection. This will be one of the most significant hindrances of pay-per-mile adoption.
Growth of telematics mean likely upswing in UBI
Telematics are expected to experience considerable growth. By 2020, roughly 70% of all auto insurance carriers are expected to use telematics usage-based-insurance. The automotive telematics market, furthermore, is expected to grow at a CAGR of 23.57% between 2018-2022. Most likely this uptick of telematics will result in more options in UBI programs, as the user demand increases. And as the technology advances, both insurers and individuals will benefit from more accurate, personalized policies.