We keep hearing the words “insurance telematics” being uttered around the insurance world, but what is it? And should we care about it?
Since the adoption of the financial credit score as a way to price premiums, insurance underwriting has changed – it was an innovation for its time. Now, a new way of underwriting is on the horizon, called Telematics. Over the last ten years, insurers have gone from hypothesis to practice in the market introduction of insurance telematics.
Telematics is the idea of machine-to-machine (M2M) communication services. (Worry not, our Terminator robotic overlords are still years away from sentience.) These technologies have reduced the cost of connecting remote endpoints. Things like smartphones to temperature sensors are all M2M communication services that help make our lives that much more convenient.
Telematics allows insurers to calculate premiums primarily with information that literally gathers itself. Starting from there, carriers can verify and validate the information that has been provided.
It is reasonable to assume the following: the more a car is used and the more miles that are driven, the more it’s exposed to risk. But one must consider how well the driver operates the vehicle. Things like age, education level, and driving experience were once used to get a good idea of driving ability.
Vehicle electronics capture hundreds of sensor inputs for processing by onboard controllers and can directly measure your behavior in space and time and report your driving to diagnostic ports.
Experts can then analyze this data and look for patterns that indicate poor or dangerous driving habits like speeding, cornering, excessive braking, or rapid acceleration, which help underwriters get an accurate price for customers’ premiums on their insurance.
Telematics will help insurers and underwriters. Contact Reata Insurance for the best rates and for all of your insurance needs.