Resources & Insights

Telematics: The Road to Lower Auto Premiums

July 29, 2016

No one likes Big Brother, but what if you could save up to 30% off your automobile premiums simply by sharing some information with your insurance company about your driving habits?

CCIG Personal Lines Manager Matt Genova.

Thanks to what are known as telematics, our vehicles today are safer, help us from getting lost, can summon roadside assistance and even dial 911 in case of an emergency.

We’ve all seen the OnStar ads on TV. The scene is an accident site. A voice can be heard, asking the driver and his passenger whether they’re alright and assuring them help is on the way. That technology is, in fact, about 20 years old.

More recently, cars are being equipped with telematics that include stolen-vehicle tracking services, vehicle locators, vehicle diagnostics, traffic information and much more. Telematics can also monitor if and when we’re on our cellphones while driving.

It’s no wonder that telematics are helping lower insurance costs, leading to the rise of what’s known in the industry as “usage-based insurance,” or UBI. Premiums, in other words, now can be based on individual driver habits, rather than factors out of an individual’s control.

By installing a plug-in telematics device in your car, the insurer tracks your vehicle’s movements and can “read” how quickly you accelerate, whether you’re braking smoothly or not, how you’re cornering, what times of the day or night you’re driving, and more.

In short, the device measures how well you drive. The better you drive, the lower your insurance premium. Interestingly, studies have shown that drivers who utilize telematics do, in fact, demonstrate better driving habits.

It’s an approach that makes especially good sense for someone who doesn’t drive much or for new drivers. Those younger drivers have, in fact, readily embraced UBI, according to a recent industry survey.

More millennials (88%) expressed an interest in taking out a UBI policy than all other age groups (74%), the survey found. What’s more, nearly three-quarters (72%) of millennials believe auto insurance premiums based on their driving habits is a better way to determine coverage costs than traditional factors such as age, gender and credit score.

As in all things technology-related, telematics have raised privacy concerns. In response, some states have passed legislation requiring insurers to disclose their tracking practices. Also, some insurers limit the data they collect.

At the same time, more of us in today’s connected world have grown accustomed to information-sharing. That helps explain why SMA Research predicts that roughly 70 percent of all auto insurance carriers are expected to use telematics UBI by 2020.

Ask your agent whether your insurance carrier will provide you a discount for using a telematics device.

Matt Genova is the Personal Lines Manager at CCIG.

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