Changes are occurring at a rapid rate in today’s auto insurance world.
From the InsurTech boom to semi-autonomous car technology — there have been many advances in the once slow-moving industry.
Most notable are the shifts in drivers’ road habits that are encouraging auto insurers to change their traditional ways. The way people drive has led to new insurance models, more coverage options and greater integration of technology.
The National Highway Traffic Safety Administration released estimates that traffic fatalities were up 10.4 percent in the first six months of 2016 over last year. While a strong economy and low gas prices result in more miles driven, there is still an increase in traffic deaths once that is accounted for. What’s causing the fatal jump?
Driver inattention on the road is increasing as motorists grow more distracted. Some states have even seen distracted driving fatalities doubling. Speeding and drunk or drowsy driving may also be contributing to the increase. Here’s how dangerous driving habits are changing the auto insurance industry right now.
“Pay how you drive” insurance models
Many insurers have implemented “Pay how you drive” models to adapt to drivers’ changing habits and the insurance telematics market is forecast to grow at a 50% compound annual growth rate by 2020. This model appears to be exactly what drivers were looking for as there are now 12 million drivers utilizing usage-based insurance.
While data has previously been used to price premiums, it has operated under generalities. A more personalized model is appealing to drivers who have previously been frustrated by auto insurers’ assumptions. In other pricing models, drivers may have a risk profile that does not accurately represent them and is based on average data for all drivers in their age group or city. With “Pay how you drive”, drivers have more control as telematics devices measure their habits.
“Pay how you drive” models can save both insurers and consumers money and many agents are choosing to recommend them for their efficiency and accuracy. Carriers can make informed decisions and determine a premium price based not only on location, age or driving record, but also on individual driving behaviors.
With UBI, drivers can be priced accurately based on their risk and that will offer a value to customers. “Pay how you drive” will help keep drivers safe by providing peace of mind and highlighting driver improvement areas. The driver can then work to improve his or her habits for a safety and cost benefit. Additional unique services can also be offered through this technology, such as vehicle diagnostics, real-time navigation and in-vehicle entertainment systems which may boost consumer satisfaction.
UBI allows insurers to understand the shifting habits of drivers to a greater degree and adjustments can be made if a driver exhibits risky behavior or develops unsafe habits. Both drivers and insurers can benefit from “Pay how you drive” insurance models.
Shared mobility coverage
With technology advancements, drivers’ behavior is shifting toward lower vehicle ownership. Habits are changing and more drivers are choosing to use ridesharing services or car share their own vehicle. Considering that cars are parked 95 percent of the time, shared mobility is sensible as it improves efficiency and can be more cost effective, especially in urban environments. Uber and Lyft offer ridesharing services while companies like Maven and Getaround allow you to rent a car per hour or put your own vehicle up for car share.