How IoT will change auto insurance Posted on : May 23 - 2017

To determine policy premiums, auto insurers have traditionally used factors such as driving record, vehicle usage and insurance history. This is in addition to outside variables like customer location (collision/theft rates in the area), age and gender (teen males tend to have higher rates), and non-driving elements like credit score.

 Recently, however, some insurance companies have begun to harness the internet of things to monitor real-time driving habits. By employing telematics devices, which plug in to the vehicle’s on-board diagnostic port, insurers are provided with analytics about a policyholder’s specific behind-the-wheel behaviors. So, instead of paying for collision coverage even when the vehicle is parked in the garage, customers would only pay for it when the car’s being driven.

This is called usage-based insurance, and Business Insider Intelligence estimates that over 50 million U.S. drivers will have tried UBI by 2020. By leveraging such refined data, premiums can be closely tailored around a driver’s level of risk. For safe drivers, especially, the prediction is that car insurance rates will be lowered.

But what we’ve seen with telematics is only the beginning. According to an SMA research survey, 74% of insurance executives believe IoT will disrupt the industry by 2020. It’s therefore no surprise that many insurers have begun to invest in IoT research and implementation. When autonomous cars hit our roads en masse, the business model and underwriting practices of auto insurance companies are likely to be changed forever. View More