Telematics is Usage-Based Insurance or UBI.
Usage-Based Insurance is a recent innovation by auto insurers that more closely aligns driving behaviors with premium rates for auto insurance. Mileage and driving behaviors are tracked using odometer readings or in-vehicle telecommunication devices (telematics) that are usually self-installed into a special vehicle port or already integrated in original equipment installed by car manufacturers. The basic idea of telematics is that a driver's behavior is monitored directly while the person drives. These telematics devices measure a number of elements of interest to underwriters: miles driven, time of day, where the vehicle is driven (GPS), rapid acceleration, hard breaking, hard cornering, and air bag deployment. The insurance company then assesses the data and charges insurance premiums accordingly. For example, a driver who drives one distance at high speed will be charged a higher rate than a driver who drive short distances at slower speeds.
UBI programs offer many advantages to insurers, consumers and society. Linking Insurance premiums more closely to actual individual vehicle or fleet performance allows insurers to more accurately price premiums. This increases affordability for lower-risk drivers, many of whom are also lower-income drivers. It also gives consumers the ability to control their premium costs by incenting them to reduce miles driven and adopt safer driving habits. Fewer miles and safer driving also aid in reducing accidents, congestion, and vehicle emissions, which benefits society.
UBI is poised for rapid growth in the U.S. According to SMA Research, approximately 36 percent of all auto insurance carriers are expected to use telematics UBI by 2020.
Telematics-based UBI growth is being propelled by technology advances, which continue to substantially improve the cost, convenience, and effectiveness of using telematics devices. It is through the use of telematics that insurers are able to collect driving data that better enable them to more closely link a driver's individual risk with premium.
Will you allow an insurer to install or monitor your vehicles data? I think that question goes to how good of a driver you think you are.
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