“Necessity is the mother of invention.” Rightly said, isn’t it? You wish to pay the premium according to how you drive! Your desire might come true in the near future with such a rapid advancement in telematics!
What is Telematics Insurance?
Telematics insurance works by installing small box like device in your vehicle tracking mileage and driving behaviours of the drivers and based on the usage, premium rates are decided. This particular practice is termed as Usage Based Insurance (UBI).
Elements Which Can Be Measured Using Telematics
- Miles Driven
- Time of Day
- Where the vehicle is driven (GPS)
- Rapid acceleration
- Hard breaking
- Hard cornering
- Air bag deployment
Based on the following data, the insurer decides the premiums. Each individual has a different premium to pay. For example, a driver who travels a longer distance at a higher speed will be charged higher than a driver travelling a shorter distance at lower speed.
The first UBI program came into picture about a decade ago in the U.S. when Progressive Insurance Company and General Motors Insurance Company (GMIC) started offering mileage- linked discounts for an amalgam of GPS technology and cellular systems tracking miles driven.
- UBI is of great advantage to the insurers, consumers and the society. Insurance premiums linked directly to the performance of the vehicle allows insurers to price the premiums. This also increases affordability for lower risk drivers. Safe and alert driving also reduces the risk of accidents, thus benefitting the society.
- Usage of telematics helps the insurers in estimating accidental damages accurately and also reduces fraud by giving them access to analyze the driving data like speed, time and hard breaking during an accident.
- Driving behaviour pattern and mileage tracking has raised privacy issues amongst people. People are reluctant in giving out their locations to the insurers.
- Implementing UBI program, particularly that involving telematics can become expensive for the insurers as it relies on costly technology.
- As most of Indian population resides in villages, availability of internet for GPS tracking becomes a threat to the growth of telematics in insurance.
UBI has grown tremendously in the U.S. According to SMA Research, approximately 36 percent of auto insurance carriers are expected to use telematics UBI in U.S. by 2020.Various companies like Infosys, TCS and some insurers have started working on UBI based on telematics thus giving us hopes for development in this field.
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