Are you a safe driver? Of course you are! You are an excellent driver surrounded by a bunch of #%$*@!, well let’s just call them “bad” drivers.
These bad drivers have car insurance (hopefully) and may not be paying any more for their insurance than you are for yours. Is that fair?
Obviously, the answer is no. But how can you prove you’re a safe driver who deserves a better price on your car insurance? You might say, “I haven’t had a wreck or a traffic ticket in years.” Well, many bad drivers can say the same thing. There is an old saying, “Sometimes you’re lucky even if your not any good.”
How can a car insurance company tell if you are a safe driver?
Insurance companies use all kinds of information about people in order to make sure those who pose the greatest risk of loss are paying a higher cost for their insurance than those who are less likely to cause losses and file claims.
How do they do it?
Traditionally, car insurance companies based the premium they charge on driver characteristics such as age, gender, location, type and value of vehicle, credit history, claim and traffic violation history, even occupation. These are only a few of the many characteristics that are taken into consideration when determining the insurance premium a driver will be charged for their car insurance.
This data on policyholders is used to help the insurance company predict the likelihood of an individual’s future claim behavior. These characteristics are simply generalizations about the “group” in which a person will best fit.
But, can a teenage driver or someone with a bad credit history be a “safe driver”? Of course they can.
When it comes to “groups” there are plenty of exceptions to the rule (for better and for worse). I think most of us would agree with that.
Being a safe driver is NOT a genetic predisposition or a socio-economic characteristic. Being a safe driver is a matter of practicing safe driving habits.
A traditional car insurance premium is determined by the factors and characteristics I’ve mentioned above. What has not been possible to factor into most traditional insurance premiums is your current driving behavior.
Think about it. Even though you had accidents in the past, you may be a very safe driver now.
The problem is there has been no accurate, measurable way to “catch” people driving safe. So, insurance companies couldn’t tell if you’re really a safe driver, or if you have just been really lucky.
Safe drivers have never been able to prove they are a better insurance risk than the peer group they are in…until now.
Telematics is a car insurance game-changer.
Telematics (tel·e·mat·ics) noun
Definition: the branch of information technology that deals with the long-distance transmission of computerized information.
Technology has advanced to a point where a person’s driving behavior can be monitored almost in real-time.
What if…your car insurance cost was tied directly to your driving behavior? If you’re a safe driver, you can prove it every time you drive. Likewise, if you have unsafe driving habits there can be no denying it.
Chances are, if your car insurance company doesn’t offer usage-based insurance (UBI), also known as pay-how-you-drive (PHYD), or pay-as-you-drive (PAYD), it will soon. It’s estimated that more than 70% of auto insurance companies will utilized telematics by the year 2020.
Usage-based insurance uses a telematics device which can be installed in your car, or downloaded as an application on your smartphone, like this. This device allows the insurance company to monitor your driving behavior. If you’re a safe driver with good driving habits you may earn a lower car insurance premium than unsafe drivers with bad driving habits.
Being distracted while driving is the cause of over 25% of all auto accidents. Usage-based auto insurance can allow insurance companies to provide an incentive (lower costs) for drivers to adopt safer driving habits that will lead to fewer accidents, thus fewer claims. Fewer claims means a lower cost of insurance for policyholders.
For most car insurance companies, telematics data regarding driver behavior are used in addition to the traditional factors. Their primary goal is to help their policyholders identify and correct unsafe (distracted) driving habits. Since the widespread adoption of the smartphone in America, the frequency of distracted driving related auto accidents and driving fatalities has increased.
There are additional safety benefits offered with many telematics-based UBI programs which can help to lower accident and vehicle theft related costs by improving accident response time, allowing for stolen vehicles to be tracked and recovered, in addition to monitoring driver safety.
What about your privacy?
That is a rub, no doubt. If you want to have a reduced insurance cost because of this new technology, you must be willing to have your driving behavior monitored.
This digital era is one where the privacy of an individual is harder to maintain. When it comes to insurance, people have long understood the obligation of giving personal information in order to secure insurance coverage. This telematics data is not an obligation on policyholders. Car insurance companies are using this underwriting tool as a discounting incentive.
Car insurance companies are always in competition to find the best way to predict who the safest drivers are and get them signed up with auto insurance. Telematics is just another tool for them to measure risk. It’s a tool that we as consumers have the ability to control by our actions. The characteristics of the “group” will not be the only factors an insurance company will use to predict the risk for “individuals”.
Competition tends to favor the consumer. That’s a good thing!
You have unique insurance needs. Our staff would welcome the opportunity to help you build an insurance plan that is as accurate and efficient as possible. Call our office at 405-340-0606.
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