Why Telematics Is a Major Disruptor in Insurance?

In the near future, the key trends in auto insurance are the vehicle telematics system (VTM) and User-Based Insurance(UBI). Expect a significant shift in this industry.

The insurance market is changing rapidly thanks to digital technology. Insurers are focusing on meeting customer expectations through vehicle telematics systems. The telematics app can read the data from the customer’s vehicle and calculate insurance premiums. This information is dependent on distance covered, speed, driving style, and other factors.

Vehicle telematics is changing the expectations of the auto insurance industry and opening up new avenues for clients to be reached. Vehicle telematics is changing not only the needs of policyholders but also the delivery method. Many insurance companies are now offering personalized insurance policies for each individual.

Telematics is a disruptive force

Telematics’ recent digitization has forced the entire insurance industry to take notice of this trend and catch up. Recent research has shown that vehicle telematics plays a significant role in disrupting the auto insurance industry and achieving positive business outcomes. Big Data plays a crucial role in helping insurers solve many challenges, including data mining, handling warehouse data, building data paths for user applications, and other data processing. This is possible because vehicle telematics systems can access large and varied data structures that are easily accessible through cloud computing. Cloud computing allows customers and insurers to remotely access vehicle telematics options such as vehicle access control, weather forecasts, traffic congestion, and weather forecasts. Cloud computing and big data are becoming the standard in vehicle telematics systems and are drawing new customers to insurance policies. They offer convenience and comfort and are increasing customer loyalty.

The gap between customers and insurers has been reduced over the years by auto insurance companies. Vehicle telematics-enabled usage based insurance is growing momentum to meet customer satisfaction. It offers a flexible pricing structure over traditional pricing models and policyholders can pay their insurance rates based upon their driving habits. This is a revolutionary transformation that gives customers total control over their insurance premiums. User-Based Insurance (UBI), which is designed to help policyholders manage their driving risks, encourages people to drive safely and reduces the chance of accidents through live feedback. It also allows them to save money by driving better.

Insurance companies in the US are using different methods in User-Based Insurance models. The simplest auto insurance policies, Pay As You Drive (PAYD), are popular in the US. PAYD, which is a variable premium charge that does not include a fixed annual fee, calculates premiums based on how many miles/kilometers the policyholder drives using vehicle telematics.

The UBI model is being considered by the United States. Recent successes have shown that policyholders are enthusiastic about this new approach. In many European countries, insurance companies have moved to Pay-How-You Drive (PHYD), even after the enormous success of the Pay-As You Drive (PAYD).

Pay How You Drive monitors driver behavior and driving style. Premium charges are decreased accordingly if there is an improvement in drivers behavior. However, a lot of insurers have begun to look beyond Pay How You Drive. Manage How You Drive (MHYD), which was developed by PHYD, could be the next step of UBI. Manage How You Drive offers safe drivers a discount and informs policyholders about their driving performance via monthly feedback based on their driving score.

Telematics Benefits for Vehicles:

* Experienced drivers are often subject to unreasonably high premiums that can easily be reduced.
* Policyholders who drive a lot will be subject to lower premiums.
* Driver behavior can be improved by continuous monitoring.
* Vehicle health and fuel consumption can be easily tracked.

With innovative insurance policies for customers convenience, the vehicle telematics system as well as User-Based Insurance is causing major disruption in the auto insurance industry. Insurers are using different strategies to increase the sales and marketing of the UBI model. This will allow for balance in insurance policies. Perhaps the priority is given to price calculation and risk management from the customer’s point of view. The vehicle telematics system that disrupts auto insurance policies can be used to trigger them. It can be sustained without major changes in the structure of the company, its business model or strategy. Vehicle telematics systems are known for their conservative nature and disruption can be difficult for them, especially in the auto industry. The year 2016 could be a year for vehicle telematics system transformation. Insurance companies that are open to significant rethinking will remain innovators.