Our daily lives have been significantly changed by technology. Technology has introduced new advances to promote personalization and improve consumer experience in a variety of industries, including healthcare, manufacturing, education, finance, and insurance.
The automobile industry has been influenced by telematics as well. Telematics is now becoming more widely used in the automotive and insurance industries. India is slowly starting to embrace the idea of usage-based auto insurance. With the aid of telematics, usage-based insurance uses your driving habits and distance traveled to determine premium rates. Your insurance will be less expensive the less you travel or the better you drive.
The pandemic has accelerated this trend even more since many people have expressed a desire for usage-based insurance and stopped using their cars to get to work. Additionally, the younger generation is accustomed to paying for services they use, such as data plans for phones or automobile sharing. But what does this transition signify, how are the traditional auto insurance market being reshaped by telematics and usage-based policies, and how can insurers take advantage of this change?
Telematics and its Influence
Telematics is an automotive communication system that gathers data from the vehicle and sends it to the insurers through a variety of tools and apps. To gather, store, process, and analyze data, telematics uses GPS, Wi-Fi/Bluetooth, GSM, RF, Engine Control Units, and cloud servers. Automobile insurance providers use telematics to offer personalized premiums based on their customers’ driving habits. Telematics provides helpful information about two important aspects of driving.
- Driving behaviors as braking, speed, and accident propensity.
- Utilizing engine data for vehicle maintenance.
Insurance companies use these insights to encourage safe drivers by reducing premiums and providing other advantages. Telematics enables insurance providers to assess a driver’s risk profile and create offline and online vehicle insurance plans with a customer-specific price structure. Real-time data analysis aids in the investigation of claims by insurers and aids in the detection of fraud claims. A new method of determining rates and liability resulted from telematics. Four criteria are used by motor insurers to set the premiums, known as usage-based insurance:
- Pay As You Drive Insurance (PAYD)
Drivers can tailor the coverage of PAYD’s all-inclusive insurance package to their own needs. In short, those who use the car more frequently pay more, and vice versa.
- Pay How You Drive Insurance (PHYD)
PHYD is a type of auto insurance where the cost of the premium is based on the behavior and history of the driver. The lowest company on the market can offer affordable auto insurance to responsible drivers.
- Distance Based Insurance
Your mileage throughout the insurance period is taken into account when determining the insurance coverage. Calculate the average based on the number of miles driven and the length of time you owned the car.
- Control Your Drive Insurance (CYD)
Users of CYD can choose the premium price based on their driving and needs, just like the previous three auto insurance plans.
Benefits of Telematics in the Auto Insurance Sector
- Telematics gives drivers a real opportunity to negotiate for customized and reasonable auto insurance while also assisting insurance companies in lowering their responsibility for paying out for numerous claims.
- It enhances transparency and streamlines the entire insurance application process. Less conflict and misunderstanding will occur between the insurer and the insured.
- By having access to up-to-date and historical information on the vehicle and the driver, insurers can provide better customer service.
- Drivers can use their driving history to lower premium payments if they don’t have a speeding ticket or any injuries from accidents or collisions while driving.
- As more people learn about telematics, they’ll start to drive more cautiously. Accidents, gridlock, and cases of road rage will all decline as a result.
- Non-driving elements like credit scores, the manufacturer of the car, etc. won’t be given a lot of consideration when figuring out the premium.
Insurance Telematics has successfully combined technology, finance, and human behavior to transform vehicle insurance. It improves system transparency and raises driving safety. The benefits of telematics-based insurance extend beyond the insurer and the policyholder to a wide range of stakeholders, including automakers, the RTA, and garages. Therefore, telematics technology has a very broad application and can be utilized to increase insurance penetration and awareness.