Cooley On Cars
Smarter Driver: Pay as you drive auto insuranceYour smartphone and connected car could lower your insurance premiums if you're willing to be transparent.
-I'm guessing, if I mentioned auto insurance premiums, you don't exactly think tech can do you. But there's a coming revolution between the mobile technology that connects to your car and the way they price auto insurance that is gonna make it a tech story. And that's a big interest to the smarter as well as the stingier driver, the ideas to share information about your actual driving behavior with your insurance company which is typically done electronically. If that information shows that you're a lower risk than your policy assume, you would be in for a monthly premium discount. Now, I've got your attention. Okay. So, where does this data comes from? Well, in today's modern cars, there's a thing down under the dash here called an OBD-II port. Cars since 1996 all have one of these and that has a wealth of data coming from the vehicle's various sensors all the time about how you drive, how much you drive and the kind of inputs you give your vehicle. Now, a few years ago, some insurance companies began to tap into that data, offering customers the ability to plug in a accustomed hardware dongle into that port. They would gather in report information about their driving back to the insurance company. Well, you see, insurance company don't really wanna be in the hardware business. That's not what they do. Now, more recently, insurance companies have begun to take advantage of the fact that, first of all, most of us are carrying a smartphone now which has the ability to run an app, to process data, to connect to the internet, do all the things that are behind usage-based insurance data reporting. Secondly, there's telematics in many cars now. These various sort of concierge in the system's systems that are wirelessly connected and managed by a telematics firm, Think, Onstar or Lexus Enform. For example, State Farms is one of the insurance that've already launched the usage-based discount program that can save customers on their premiums based on their driving mileage and/or some other behaviors. Now, by whatever technology this information gets back to your insurance company- and, by the way, it's always voluntary. It can reflect a lot of parameters on how you use your car, what time or date do you drive. A lot real late at night when accidents are more common, how's your average speed? Do you break in corner hard? Do you buckle up every time? All these data, by the way, is typically gathered already by your vehicles black box. What's new here is sharing it with your insurance company and the new technologies that make that easy. Okay. So, you can save some bucks on your insurance. What's in it for your insurance company? First of all, this kind of program will tend to attract low-risk drivers. I mean, you'd be a fool to engage in more revelation of your driving behavior, if you're a high-risk driver. Secondly, it gives the insurance company more data about their customers. There's no business out there that doesn't want that. And, thirdly, I think it's an interesting path toward the insurance companies becoming providers of wireless services in the car and it's not much of a reach to see them as providers of wireless services in the home after that. I mean, most insurance companies don't just insure cars. Okay, now. Reality check. Usage-based insurance is still really rare. Most folks have never heard of it. Most of those who have don't really understand it or the technology behind it. Secondly, there's a privacy issue here. I mean, most of us are not used to sharing data about our driving habits. We are used to sharing data about everything else, interestingly enough, but driving still remains a different zone. And, third, until very recently, the hardware to make this happen was clunky in proprietary which kept it very limited. But if you look at the rise of connected cars which are real already and personal information sharing from Facebook to fitness bands, I think usage-based insurance is a matter of when, not if.