CONNECTED CAR TELEMATICS AND UBI
It has been fascinating to watch the development of telematics for driver safety over the past 15 years. We have gone from telematics hardware costing thousands of dollars to being virtually hardware free with smartphone and connected vehicle telematics. How will this evolution affect drivers and their insurers?
Telematics Technology Evolution
It started with very expensive telematics devices being hard wired into vehicles to get speed and location data. This led to the addition of accelerometers, engine diagnostic, and cellular modems to gather much richer driver behavior data in real time. This evolved into plug-in dongle telematics devices and then smartphone telematics. Today almost all new vehicles are wirelessly connected and provide very detailed data on driver behavior like lane departures, following distance, and crash alerts.
Connected Vehicle Telematics
For those new to the technology, connected vehicles have telematics devices installed by the vehicle manufacturer that tap into the engine computer to capture all kinds of data. Collected data includes location, driver behavior, engine diagnostics, to name a few. This data is then transmitted via cellular networks to the vehicle manufacturer. The vehicle manufacturers then partner with third parties, like auto insurance companies, to offer value-added products and services to vehicle owners.
Connected Vehicles & Smartphone Telematics for UBI
Auto insurers were quick to see the value of driver behavior data for underwriting and began using it to offer usage based insurance (UBI) over a decade ago. However, the costs and complexity of providing telematics hardware devices to insureds limited adoption. In the last few years, smartphone telematics eliminated these constraints, so now UBI adoption is growing rapidly. Now auto insurers are accessing connected car data that they hope will “drive” usage based insurance into the mainstream.
The next article in this series will describe how connected vehicle based telematics is disrupting auto insurance.