Vehicle telematics and user-based insurance (UBI) are key trends in the auto insurance industry and expect disruptive change in the near future.
Digital technology is vastly transforming the insurance market and insurers are investing significant attention to meet customer expectations by adopting vehicle telematics systems. The customer’s vehicle integrated with the telematics system helps calculate insurance premiums that depend on the distance traveled by the vehicle, the speed maintained by the driver while driving, and also the general driving habits of customers, as this information can be read and stored by the telematics application and became accessible not only to insurers but also to all interested parties.
Vehicle telematics is recalibrating expectations for the auto insurance industry and opening up new ways to reach customers. The rise of vehicle telematics is not only changing policyholder demands, it is also altering how it should be delivered. Many insurers are offering more personalized insurance policies for each and every individual.
Telematics as the main disruptor
The digitization process that telematics has recently brought has made the entire insurance industry stand up and take notice and eventually catch up with this change. Recent research studies have revealed that vehicle telematics is playing a prominent role in disrupting the auto insurance industry for positive business results. In this way, Big Data is playing a vital role in helping insurers solve various challenges, such as data extraction, handling, storage data, creating data paths for user applications, and among others. many others, by adopting a large and varied data structure, which is easily done. accessible to the vehicle telematics system with the influence of cloud computing. Vehicle access control, real-time updates of traffic congestion and weather forecasts and many other vehicle telematics options are accessed remotely with the help of cloud computing for both customers and companies. insurers. Big data and cloud computing technologies are the mainstream of vehicle telematics system and thus are attracting new customers towards insurance policies by providing convenience and comfort in service.
Over the years, auto insurance companies have succeeded in bridging the gap between insurers and customers. Usage-based insurance enabled by vehicle telematics is gaining momentum to meet customer satisfaction with a flexible pricing model over the traditional pricing model, and as a result, policyholders can pay insurance rates based on their driving behaviour. It is a definitive transformation that is giving customers full control over their insurance premiums. To help policyholders with their driving risks, the user-based insurance (UBI) model encourages people to drive safely and reduce the risk of accidents through live commentary, even when they can save money by improve your driving skills.
In the US, insurance companies are implementing different approaches in the user-based insurance model and simpler car insurance policies are all the rage in the car insurance market, such as Pay As You Drive ( PAYD) is one of them. Instead of paying a fixed annual premium charge, PAYD ensures that premiums are calculated based on the number of miles/kilometres driven by the policyholder with the help of the vehicle’s telematics system.
The United States is considering the UBI model as its grid. The string of recent successes has confirmed the overwhelming response of policyholders to this new approach. Even in many European countries, insurers moved to the next level of Pay-How-You-Drive (PHYD) just after the enormous success of the Pay-As-You-Drive (PAYD) model.
Pay How You Drive (PHYD) monitors driver behavior and driving style, premium charges are reduced according to improvements in driver behavior. The UBI has a great potential door to digitally enhance clients, as a result, PHYD has created a remarkable platform. for auto insurance policies, but several insurers have begun to look beyond the Pay How You Drive (PHYD) model to improve the user experience, such as a Manage How You Drive (MHYD) development seen as the next move from UBI . Manage How You Drive (MHYD) offers a discount to prudent drivers and also informs policyholders about driving performance through monthly feedback based on their driving score.
Benefits of vehicle telematics:
• Experienced drivers often pay unreasonably high premium rates that can be easily reduced.
• Encourages policyholders to drive safely and reduce the risk of accidents.
• If the policyholder drives a lot, they will get lower premium charges.
• Continuous driver monitoring helps improve driving behaviour.
• It is very easy to track the status of the vehicle and the fuel consumption of the vehicle.
The vehicle telematics system and user-based insurance system is creating a major disruptive change in the auto insurance industry with innovative insurance policy models for customer convenience. However, insurers are implementing different strategies to improve the marketing and sales process of the UBI model to maintain balance in insurance policies, perhaps also prioritizing risk management and pricing from the customer’s point of view. . The disruptive vehicle telematics system can trigger the auto insurance policy process and can be sustained without any major change in insurance company structure, business model and strategy. The vehicle telematics system is known for its conservative stance and disruption is never really easy for such systems, especially in the car insurance industry. But 2016 may be a year of continued transformation of the vehicle telematics system, with the insurers that remain innovators being those that are willing to undertake a major rethink.