One of the newest trends when it comes to automobile insurance is usage based insurance (UBI). This new trend is beneficial to both drivers, and the companies who offer it. That is because it helps insurers more accurately measure and possibly reduce drivers’ risks along with offering discounts for measurable safe driving. This has primarily been done with the use of insurance company developed in-vehicle telecommunications devices known as telematics.
These devices, provided by the insurance company, are self-installed, and monitor driving habits such as rapid acceleration, hard breaking, hard cornering and air-bag deployment among other things. The insurance company will then analyze this data and price premiums accordingly. The rise in popularity of telematics has led to interest by Google and Apple to develop smartphone apps to replace the small, yet relatively expensive devices.
Telematics gain popularity
The idea of UBI and telematics was introduced about a decade ago when insurance companies began using GPS technology to offer mileage based discounts. As technology improved, so did the cost and effectiveness of telematics. The development of these technologies were appealing to insurance companies as a way to attract low-risk drivers.
On the other hand low-risk drivers were attracted to these programs as a way to save money on insurance premiums. According to a July 2014 Towers Watson study, respondents who have or have had UBI nearly doubled in little over a year.
Google, Apple take interest
It makes sense that these tech giants would be interested in developing smartphone apps to replace telematics devices, as they could potentially gain from it. The development of these apps would increase ease and lower cost, as smartphones are already ubiquitous in the lives of consumers.
Both of these tech giants have already been accepted by consumers as large data gatherers, and the development of these apps might allow for the data gathered to be more insightful and useful than previous telematic devices. According to the same July 2014 Towers Watson study, 80 percent of consumers with smartphones (or 64 percent of respondents) said they would be comfortable with UBI apps which monitor their driving.
Implications for insurers
The possibility of Google or Apple developed UBI apps has the car insurance industry slightly wary. This is because there could possibly be a shift in the balance of power in these driver-monitored programs if the apps are able to capture consumer interest.
Insurance companies have more or less controlled these activities in the past and these apps could deprive insurers of future domination of the UBI sector. This has led to questions about whether Google and Apple would charge insurers for the information gathered. The answers to this, and other questions, remain to be seen as neither Google nor Apple have released said apps yet.