The vehicle telematics system and User-Based Insurance (UBI)
are key trends in the auto insurance industry and expect a disruptive change in
the near future.
Digital technology is transforming the insurance marketplace
enormously and the insurers are investing significant attention to meet the
customer expectations by adopting vehicle telematics system. The customer
vehicle integrated with the telematics system helps to calculate insurance
premiums which is dependent on the distance covered by the vehicle, the speed
the driver maintains while driving, and also the overall driving habits of
customers as this information can be read and stored by the telematics app and
made accessible to not only the insurers but also all stakeholders.
Vehicle telematics is recalibrating the auto insurance
industry expectations and opening new ways to reach out to the clients. The
rise of vehicle telematics not only changing the policyholders' demands, but
also disrupting the way it should be supplied. Many insurers are offering more
personalized insurance policies to each and every individual.
Telematics as a major disruptor
The digitization process that telematics has brought in
recently has made the total insurance industry to stand up and take notice and
eventually catch-up with this change. Recent research studies have revealed
that vehicle telematics is playing a prominent role to disrupt the auto
insurance industry for positive business outcomes. In this way, Big Data is playing
a vital role in helping insurers to solve various challenges such as data
mining, handling, warehouse data, building data path for user applications and
among many others by adopting extensive and varied data structure, which are
made easily accessible to vehicle telematics system with the influence of cloud
computing. The access control of the vehicle, real-time updates of traffic
congestion and weather forecasts and many other vehicle telematics options are
remotely accessed with the help of cloud computing, for both customers and
insurers. The big data and cloud computing technologies are the mainstream of
vehicle telematics system and hence are attracting new customers towards
insurance policies by providing convenience and comfort in service.
Over the years, the auto insurance companies have
successfully reduced the gap between insurers and customers. The vehicle
telematics-enabled usage-based insurance is gaining momentum to meet the
customer satisfaction with a flexible pricing model over the traditional
pricing model and as a result policyholders can pay the insurance rates based
on their driving behavior. It is an ultimate transformation that is giving
customers complete control over their insurance premiums. To help policyholders
for their driving risks, User-Based Insurance (UBI) model encourages
individuals to drive safe and lower the risk of accidents happening through
live feedback even as they can save money by improving their driving skills.
In the US, Insurance companies are implementing different
approaches in User-Based Insurance model and the simplest, auto insurance
policies are trending in the auto insurance market, such as Pay As You Drive
(PAYD) is one among them. Rather than paying a fixed annual premium charge,
PAYD ensures premiums are calculated based on the number of miles/kilometers
driven by the policyholder with the help of vehicle telematics system.
United States is considering the UBI model as their grid.
The spate of recent successes has confirmed immense response of policyholders
towards this new approach. Even in many European countries, insurers moved to
the next level of Pay-How-You-Drive (PHYD) right after the huge success of
Pay-As-You-Drive (PAYD) model.
The Pay How You Drive (PHYD) monitors the driver behavior
and driving style, the premium charges are reduced accordingly with
improvements in driver behavior.The UBI has a great potential gateway to
digitally enhance customers, as a result, PHYD has created a remarkable
platform for auto insurance policies, but a number of insurers have started
looking beyond the Pay How You Drive (PHYD)model for better user experience, as
a development Manage How You Drive (MHYD) considered as the next move of UBI.
Manage How You Drive (MHYD) offers a discount to safe drivers and also intimates
the policyholders about driving performance through monthly feedback depending
on their driving score.
Vehicle telematics benefits:
• Experienced drivers often pay unreasonably high premium
charges which can be reduced easily.
• Encourages policyholders to drive safely and reduce the risk of accidents.
• If the policyholder drives very often then he/she will get fewer premium charges.
• Continuous monitoring of the driver helps to improve the driving behavior.
• It's very easy to track vehicle health and fuel consumption of the vehicle.
• Encourages policyholders to drive safely and reduce the risk of accidents.
• If the policyholder drives very often then he/she will get fewer premium charges.
• Continuous monitoring of the driver helps to improve the driving behavior.
• It's very easy to track vehicle health and fuel consumption of the vehicle.
The vehicle telematics system and User-Based Insurance
system is imparting a major disruptive change in the auto insurance industry
with innovative insurance policy models for customer convenience. However, insurers
are implementing different strategies to improve the marketing and sales
process of UBI model to maintain the balance in insurance policies, perhaps the
priority is also given to the risk management and price calculation from the
customers' stand point. The disruptive vehicle telematics system can trigger
the process of auto insurance policies and can be sustained without any major
change in the insurance company structure, business model, and strategy. The
vehicle telematics system is known for its conservative posture and disruption
is never really easy for such systems, especially in the auto insurance
industry. But the year 2016 can be a year of continuing transformation of
vehicle telematics system, in which the insurance companies who remain as innovators
will be those who are willing to engage in significant rethinking.
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