For years, far too many drivers have been overpaying for their car insurance.
But with the growing use of telematics, safe drivers from all over the world may soon find a big chunk of change in their bank accounts.
The long-established way that insurance companies created policies was through averages. Age groups, types of cars, and even gender, were essentially the foundational methods that assessed risk and, in turn, shaped policy.
However, with the implementation of telematics, insurance companies potentially have a wealth of big data to look through, and can now treat drivers on an individual basis and form policies based on specifics rather than generalizations.
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Because of this, the insurance industry has the ability to change the way car insurance is priced.
Installing a telematic snapshot device into a policyholder’s vehicle give insurance companies the ability to monitor speed and the time of day a vehicle is driven. These devices also can send warnings if a person is driving too aggressively.
The accumulation of big data provides a way for insurance companies to monitor individuals and reward them with lower rates, and also a means to instill better driving habits.
Insurance Telematics in the UK
The technology is already being used overseas, as Teletrac Inc. partnered with Citroën to release the first consumer vehicle with a standard fit telematics-based insurance solution on Citroën’s C1 Connexion.
This partnership allows for an insurance program that analyzes driver safety behavior through Teletrac’s telematics platform to provide the driver with regular feedback, allowing the insurer to change the behavior of unsafe drivers.
Citroën’s C1 vehicles also feature Teletrac’s safety analytics tracking a way to assist insurance companies gauge driving behavior. By providing free or heavily discounted insurance included in the price of the car, the driver must watch their safety scores which are delivered to drivers every other day from Teletrac’s safety analytics system via email.
The Future of Big Data Usage by Insurance Companies in America
For now, the use of big data analytics for insurance companies is still in its developmental stages.
In the United States, only 2 percent of the car insurance market offers a policy based on monitoring driving, according to a telematics insurance report by consulting firm A.T. Kearney.
But that percentage is expected to grow to approximately 10-15 percent of the market within the next five years.
The eventual goal is to create a system with continuous communication between insurance companies and drivers. This way drivers will be able to monitor, react and alter their behavior if necessary based on the big data analysis that insurance providers perform.
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Mike Jarvinen is the VP of Marketing for Teletrac Inc. and when he's not busy focusing on marketing and product strategy, he provides the Teletrac blog with insight into fleet managment best pracitices for companies ranging from SMB to enterprise. Email Mike Jarvinen