Challenges to Migrating to This Information Gathering
The gathering of this information is limited these days at least because not all vehicles have the capability for it. In theory, all cars could be equipped with devices to measure this, but those without pre-existing access to the internet would be too expensive for the insurance companies to modify in comparison with the benefits received.
Insurance companies always benefit when better data is available, and this is why they encourage that their clients participate in this sharing of information, but the benefits are simply not that significant to have them spend a lot of money on this.
When this technology first emerged, a hardware device would be installed in the vehicle of participants, but we’ve moved away from that and to software applications, due to software being much cheaper than physical devices.
For this all to make sense, the costs of the program have to be kept to a minimum, otherwise the efficiencies involved in the information gathering would be offset at least somewhat or even surpassed by the costs of implementation.
Moving to software solutions does limit the program to those vehicles that have the capability to have software installed, smart vehicles in other words. While a lot of new vehicles are being built with this capability, there are a lot of cars on the road that do not have this ability and it will be many years before we could ever see something like this mandatory.
Insurance companies do not even want to make this a requirement for those who do have the means to participate in these programs, as many drivers are reluctant to do so even if they have the means.
There are a number of concerns that people have with this, not the least of which is the possibility that the data will cause their premiums to rise. Insurance companies generally have to have some sort of assurance included when they look to convince people to get involved with this, including such things as trial periods where the user can opt out at any time during the initial period with no repercussions on their insurance coverage or rates.
Insurance companies also offer incentives such as a means to get help in an emergency, as well as appealing to things like contributing to overall safety if people participate due to their being more attentive and exercising a greater standard of care when their driving is monitored.
This is of course not anonymous data collection as many things are and the data that is collected is certainly used to profile drivers on an individual basis. Just having this in force serves to positively effect both public safety and the amount paid out in claims by insurance companies, which is the biggest reason they are so enthusiastic about it.
Since the program is voluntary, it does tend to attract the best drivers, those who are confident enough that their driving habits will indicate that they have at least below average risk profiles. Others may be more reluctant and insurance companies do want those people on board as well, and perhaps especially these people, as they are the ones most in need of monitoring.
Some insurers even offer a guarantee that their rates will not go up for a certain period of time in order to convince people to give it a try. About half of drivers these days are at least open to the idea of this, and the challenge is to get more of the other half more willing to accept it.
The industry has only been able to achieve about a 10% market penetration with this monitoring, but this is a very new idea and as time goes on the expectation is that its popularity may increase to the point where most drivers will use it, but that will take real time.
What Auto Insurance Telematics Measure
The main focus of auto insurance vehicle monitoring is to measure how a driver operates their vehicle. Therefore, things like speed, acceleration, braking, cornering, how far you drive, where you drive, what time of day you drive, and so on are at the heart of the analysis that companies use to assess your risk.
As always, the insurance companies look to accumulate statistics on all of these factors and use them to measure the risk that given drivers may have to get in an accident, and especially their likelihood to cause accidents.
This is all in the early stages and as insurance companies collect more and more data, the analysis will become more refined and more accurate. Just looking at what is collected though can give us a pretty good idea of whether or not a given driver may be a good fit for this.
Insurance companies already factor in things like the performance of a vehicle and this is one of the reasons why those who drive higher performance vehicles pay more for auto insurance than those who drive models which are tamer and are generally driven that way.
This data, called telematics, allow insurers to actually measure how hard vehicles are driven, and it may be that someone drives a high-performance vehicle but does not drive it very hard, where someone else may drive one with much lower capabilities but drive it pretty hard.
There may not even be much of a connection between some of the things involved in these measurements, things like how fast one accelerates for instance, but any time there is a correlation with data, the insurance company will use it. Rapid acceleration is probably not a big factor in itself in accidents, although it may be indicative of more aggressive driving overall, and that is enough.
Making Sure You Fit the Model Well Enough
Obviously, certain drivers would not benefit from any of this, particularly drivers who like to drive fairly aggressively, and many people pay a lot of extra money for the ability to drive this way if they wish. They would not want to pay even higher insurance rates than they already do for driving a vehicle with better performance if they actually drive this way.
Drivers who drive more gently are a different story, and their gentle driving would be subject to be rewarded by having this all measured. There are a number of reasons why people would be willing to enroll in these programs, for example a feeling that they are contributing overall to public safety, or because this is all interesting enough to them, but how this may affect one’s rates is still the primary consideration.
It makes perfect sense that those who may expect to benefit from such a scheme are the ones that are likely to wish to participate in it, the better drivers, or at least those who fit the model well enough.
People who do like to drive more aggressively, or have other factors that may adversely affect their scoring in the various categories that are used aren’t going to wish to become involved in this profiling, and would be well advised not to do so, given that this is set up to disadvantage them.
Doing so would be a lot like setting up a speed monitor that is sent to police, if you don’t speed you probably wouldn’t mind to much, but if you like to drive over the limit this would make no sense whatsoever for you to do.
Eventually we may see all cars actually set up this way to send data to police and other authorities, but that time is quite far off, and we do get to choose these things presently. If we do choose something which harms us, whether that be this speed monitor, vehicle telematics, or anything else, this is simply not a rational choice.
This is the conundrum that faces auto insurers, knowing that the riskier segment of their clientele will not opt in nor would it even make sense for them to do so.
However, the plan is surely to see all drivers monitored this way one day, and you do have to start somewhere. If this sort of thing ever becomes mandatory, as it very well might and even probably will be one day, then we will then achieve the potential of the system.
For now, telematics does provide many drivers with the opportunity to benefit from this tracking, provided that their driving suits it well enough to get good grades.