Connected Car Data Helps Auto Insurers Refine Risk, Provide the Right Price

To price an auto insurance policy for a family that includes drivers sharing multiple vehicles, insurers often must assess risk by averaging it over the family and vehicles.

“That works, but they can do a better job if they know more about which person is driving which vehicle, how far it was driven, and in what way the vehicle was driven,” Bill Kreamer, senior director of connected auto at Cambridge Mobile Telematics (CMT), told PYMNTS.

Cases like this have contributed to the growing adoption of usage-based insurance policies that use telematics to share with insurance companies data about vehicles and the manner in which they are driven. The more data sources insurance companies have, the more accurately they can assess risk.

More consumers are opting in to share the data because they’re finding that they save money when they can prove they drive safely.

“It represents a way for the insurer to really refine the risk and provide the right price to that family,” Kreamer said.

Using Multiple Data Sources

CMT provides technology and some user experience elements to insurance companies that include it in their usage-based auto insurance for policyholders. To gather risk pricing data, the company has long used drivers’ smartphones, proprietary Tags — Bluetooth-enabled devices that stick on the windshield — and other devices.

Now it’s added another data source to its DriveWell telematics platform: connected cars.

Each device can deliver different sorts of data. For example, smartphones tell which driver is piloting the car on each trip, Tags capture the 15% to 20% of trips that are taken without a cellphone in the car, and connected vehicles provide odometer readings and location data so the insurer can price the location-based risk properly.

“Insurers are looking for any way possible to collect this kind of data, and they have a bunch of options,” Kreamer said. “More and more now, vehicles themselves are connected to the internet and are an option for collecting data.”

Delivering a Consistent Experience to Policyholders

By pulling together these different options, insurers can not only combine the different data sources to assess risk, but also provide a consistent experience to their policyholders, so the program will look the same to the insured no matter which devices they have enabled.

About 15% of the vehicles on the road are connected, and that share is growing.

For insurers, these provide better data on the vehicle dynamics and the safety systems that are activated, Kreamer said. For consumers, they offer another way to participate in usage-based insurance programs. It’s also easy to sign up — they click on a message that appears on the car’s infotainment screen asking if they’d like to participate.

“That’s a really easy experience, and for consumers, it represents another way for them to be able to take advantage of the safe driving discounts that are out there for proving they’re a safe driver,” Kreamer said.

Encouraging Safer Driving Behavior

These programs have grown substantially, especially in the last three to five years, Kreamer said. Today, every top-10 insurer has a telematics program.

“Insurers are intending to expand broadly,” Kreamer said. “They see that there’s a lot of value in this data being used all throughout their systems, whether it’s helping people get a discount because they’re safer, encouraging them to be safer and be changing driving behavior, or using it in the claims process.”