In our previous post, we suggested the ways in which technology is changing driving and auto insurance. Cars are becoming the equivalents of rolling computers — gathering, storing, and transmitting data such as speed, braking habits, road conditions, and more. And all that technology makes insurance pricing and claims service more personal and efficient. That, in turn, improves and individualizes insurance pricing, increases convenience for insurers and their policyholders, and improves the user experiences of policyholders.

In this post, we’ll examine the policyholder’s point of view a little more closely. You’ll get the sense that insurance is no longer the stodgy, boring stuff you used to think it was.

It’s All About the Driving

Arthur C. Clarke wrote, “Any sufficiently advanced technology is indistinguishable from magic.” But even if he didn’t, technological developments like usage-based insurance (UBI) may seem like magic. By recording driving habits and rewarding safe driving, UBI has the potential to help the environment by causing people to reduce speed, thereby helping to reduce exhaust emissions. Same goes by encouraging people to not drive during rush hour; to carpool; and to be more mindful of the effects of their driving habits. By recording the times and days of the week people drive, younger drivers can be discouraged from driving at night or on weekends, reducing risks until they get more experienced. And if drivers record their driving activities with phone-based apps, UBI can help improve safety because some newer phones count distractions. And some even allow drivers to block their phones while they’re driving.

Consider some of the ways in which UBI performs its magic on how insurance is paid for:

• UBI can enable pay as you drive (PAYD); that is, rather than paying periodic premiums (monthly, quarterly, annually), policyholders can be charged for coverage only when they drive (per mile, per kilometer, per time spent driving).
• UBI can enable pay who is driving (PWID); that is, all drivers in a given household get their own apps and connects when they get in the car. That means cautious Grandma doesn’t have to pay as much as Junior with the lead foot.
• UBI can enable pay how you drive (PHYD); that is, Grandma, who always obeys posted speed limits doesn’t have to pay as much as Junior, who ignores them.

And with monitoring technology like our Internet of Things Analyzer (msg.IoTA), actual driving patterns, habits, behaviors, ecological impact (speed and fuel consumption), and incidents are scored — and premium prices are derived accordingly. That can seem like magic for drivers accustomed to being rated on age, gender, geographic location, and other such general criteria.

Wait Till You See What’s Next

If phrases like digitalization of customer journey come to mind, you’re exactly right. And with the proliferation of ever more wearables, tracking apps, productivity apps, and others, more and more people will experience the magic of technology.

In our next post, we’ll discuss the positive implications of UBI for insurers. We hope you’ll be along for the ride.