The insurance industry, especially the auto industry, has been using the same tactics to determine risk and price for years. Telematics is disrupting the way insurance companies write policy by offering insurers data on driver habits that can be used to influence policy price and coverage. What are the benefits of telematics for insurance companies and what can we expect to see in the near future?
Elon Musk, the founder of Tesla, is rumored to be entering the insurance business, and Warren Buffett, CEO of Berkshire Hathaway, isn’t worried about the competition. “It’s not an easy business,” Buffett told shareholders at the Berkshire Hathaway annual meeting. “The success of the auto companies getting into the insurance business is probably as likely as the success of the insurance companies getting into the auto business.”
Musk revealed that Tesla will be launching its own insurance product this month. Musk said that Tesla has “direct knowledge” of a person’s risk profile “based on the car,” which gives it an “information arbitrage opportunity.”
Read more here.
We spoke with Greg Donaldson, Senior Analyst at Aite Group, to discuss technology that is disrupting the auto insurance sector: telematics. “Telematics is a rapidly developing field that’s not only fueled by our ability to analyze and apply data through Artificial Intelligence and Machine Learning, but also because we have so many more devices able to capture and communicate data in real-time from the vehicle to the insurer,” Donaldson said.
In the past, insurers have relied on basic information about the vehicle and driver to craft a policy. With telematics, data gathered from transmitting devices paired with AI and ML work together to create a comprehensive risk analysis, helping insurers write more accurate policies. “All of this data becomes actionable,” said Donaldson. “It can be used immediately at the site of an accident to help the driver get the claims process started immediately. It can be used in accident reconstruction to enable insurers to build a more accurate assessment of what actually happened, rather than relying on witness testimony. And finally, it can be used to develop a more complete and personalized risk profile, which will ultimately have an impact on insurance rates for consumers.”
Read more here.
The connected cars of today produce mass amounts of data that is changing the insurance industry. Thanks to this data, usage-based insurance (UBI) policies are becoming more popular. Using embedded telematics, insurers can collect and analyze this data to create a better policy. Companies like Progressive are using telematics to support electronic logging driving data for fleets, tracking the distance and time driven.
Other insurers have taken notice and are implementing telematics for personal vehicles. By tracking driving times, distance, and behaviors, insurers collect a vast amount of data that is then analyzed to determine coverage and policy price. For policyholders, this promotes safety and cost savings.
Read more here.