As in practice, today auto insurance is a fixed cost, assessed annually and usually paid for in lump sums on an annual, semi-annual, or quarterly basis. However, it is been realized that there is a strong correlation between claim, loss costs, mileage driven and driving behavior. For this reason, there is a need for reformation in the system to convert fixed costs into variable costs that can be used in conjunction with other rating factors in the premium calculation. Usage Based Insurance has the advantage of utilizing individual and current driving behaviors, rather than relying on aggregated statistics and driving records that are based on past trends and events, making premium pricing more individualized and precise.
The use of telematics helps insurers more accurately estimate accident damages and reduce fraud by enabling them to analyze the driving data (such as harsh braking, speed, and time) during an accident. This additional data can also be used by insurers to refine or differentiate UBI products. Further, the ancillary safety benefits offered in conjunction with telematics-based UBI shall also help to lower accident and vehicle theft related costs by improving accident response time, allowing for stolen vehicles to be tracked and recovered, and monitoring driver safety. Telematics also allow fleets to determine the most efficient routes, saving them costs related to personnel, fuel, and maintenance.
The basic idea of telematics behind auto insurance is that a driver's behavior can be 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; harsh braking; hash cornering, over-speeding. The insurance company then assesses the data and charge insurance premiums accordingly. Recent accelerations in technology have increased the effectiveness and cost of using telematics, enabling insurers to capture not just how many miles people drive, but how and when they drive too.
Usage-Based Insurance (UBI) closely aligns driving behaviors with premium rates for auto insurance. It is through the use of telematics (In-vehicle GPS/telecommunication devices) that insurers will be able to collect driving data which will enable them to link a driver’s individual risk with premium.
MapmyIndia UBI solution shall offer many advantages to insurers, consumers and society as a whole. Linking insurance premiums more closely to actual individual vehicle or fleet performance shall allow insurers to more accurately price premiums. This increases affordability for lower-risk 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.