What can your car tell me about you?
Uses of Telematics
Telematics is a powerful tool for managing fleet safety and vehicle maintenance. By measuring speed, braking, cornering and use of connected electronics while you drive a “ score” can be developed to indicate your relative safety as a driver. There is substantial research that use of driver behavior monitoring is a valid tool for risk reduction.
Telematics in the transportation industry delivered positive returns on investment. Fleet operating costs were controlled by reducing extra trips and lowering maintenance costs from hard driving maneuvers. The safety improvements by monitoring driver behavior have proven to be a significant risk reduction tool. Parents can use telematics to monitor youthful drivers. Information on driving behaviors, trips and driver distractions can be a powerful tool in managing a young driver.
The Technology
The technology has also evolved. The original fleet telematics applications required installation of additional hardware and communication equipment. The next generation used the diagnostic port on your vehicle and sent data using the drivers’ cell phone or open wi-fi networks. The most recent versions use an app installed on the driver’s smart phone and a tag to link the phone to the vehicle. Each improvement in technology has lowered the cost of implementation. Apps are available to download from the Google Play store or Apple App Store. Telematics is a proven way to improve efficiency and safety for automobile operations. Any company or family should consider the benefits of this technology.
Insurance and Telematics - What's In It For Me (WIFM)
The insurance industry has taken notice of this technology and now promotes using this technology. Insurers want to monitor your driving habits and use this data to rate your policy. These programs were introduced as discount programs so safe driving would earn you a premium reduction.
The insurance company also has its own WIFM calculation. It can verify both driving behavior and rating information using telematics. Insurance carriers believe that if the vehicles were properly rated for radius, use and garaging location, the auto line of business would be profitable. The telematics data can confirm all of the rating data. This includes miles driven, the location data confirms radius of operation. Telematics can also verify garage locations. The obvious payoff for the insurer is reducing collecting the correct premium and reducing losses.
The latest application of this technology is “pay per mile” insurance coverage. You are charged only for the miles you drive. Most of these programs include a daily charge plus the per mile charges. The daily charge is assessed every day, not just when you drive. Other programs have a flat base rate and then mileage charges. If you truly drive a few miles, this may be of benefit. To access these programs, you must participate in some form of vehicle monitoring.
Ironically, the increased cost of vehicle systems that allow telematics to work also increase repair costs. So, while accident frequency may be lowered, the cost per accident is trending upward. With lowered premium from discounts for telematics use, the bottom-line impact may be muted. This is driving the shift to premium increases being applied for poor driving scores. Telematics is no longer a discount only program. Check your carrier to verify terms and conditions.
WIFM for consumers
The most common incentive is the insurer offers a discount for your participation in the telematics program. Review the program rules as some programs can increase your costs if your driving behaviors fall outside of the program defined “safe” guidelines. What was once a pure discount tool is evolving into a rating tool. Be sure to read the terms and conditions carefully before you enroll. Read Before You Sign!
Big Data
Your insurance carrier is developing a rich database about your life, not just driving. Location data from the telematics device can tell where you were and how long you stayed there. This is rich data for marketing purposes. I turned on Google location services as a test and was routinely solicited for reviews and information about places my phone visited. Telematic systems gather the same data and much more.
A review of one terms and conditions agreement for a driver monitoring program indicates that the insurer can monitor and collect data on time of day, driving location, distractions (cell phone use), speed, acceleration, braking and the use of other applications (music or video streaming) while the vehicle is in motion. The data collected is owned by the insurer and can be used as the insurer sees fit. It can be shared in accordance with the insurer’s privacy notice, another document that governs your relationship with the insurer that you probably have not read. One of the early adopters of this technology has since split off the technology company into a separate firm to make use of this the data.
Your Choice
You need to make the value judgment of privacy versus discounts. How much information you want to share with the insurer and their third-party partners is a consideration. The inherent return on investment for telematics is a solid number. It can be a powerful safety and risk management tool that can benefit you and have a positive return on investment without sharing your data with anyone else.
The Driehaus Difference
Driehaus Insurance Group can help you with identifying telematics programs for commercial and personal insurance programs. Reach out to us at 513-977-6860 or on the internet at www.driehausins.com.