Why Insurance Companies Need to Structure Their Policies Based on the ‘SMART’ Revolution
It’s high time car owners and insurance companies rethink the whole structure behind car insurance. With the advent of smart features and the birth of AI in the automotive industry, cars will slowly transition from being a utility to providing a service. The impact of such a fundamental transformation is bound to be felt far and wide, with the insurance sector being the one most affected.
As a matter of fact, machine learning is currently making leaps and bounds in the car insurance sector, leading to the most recent, albeit not so well-outlined division between future and traditional insurers. Additionally, there has been the birth of the insurtech players. They are currently providing a myriad of possibilities for drivers to benefit from data-intensive structures.
For decades, car insurance has been a lucrative venture for many insurance companies. Firstly, the law has made it mandatory that all cars on the road need to have an insurance cover. Moreover, in some countries, drivers are required to have a policy whereby any secondary car they own, whether they are driving it or not, is required to have insurance; regardless of whether they are in the parking lot 90% of the time.
In response, some insurance companies such as Metromile has suggested a new insurance policy based on how often a car is being driven by its owner. Indeed, the company has already attracted a massive following, pulling in a whopping $300 million worth of investment for their design systems to be put in place. The goal of these design systems will be to not only to charge the consumer based on how many miles they drive, but also provide automation when it comes to accident reports for each particular vehicle. A sensor will be fitted in the vehicle to record the data.
Other companies like Zubie have opted to have a device plugged into the OBD port of their consumer’s cars, to enable it to monitor the driver. Additionally, the device will even warn the driver of certain parts of the car that require urgent service or replacement. Last but not least, the car owner will then pay a premium based on their driver score.
As for Kasko2go, they have come up with a strategy to attract consumers with low prices by using smartphone technology to enable users to create their portfolio when they become a low-risk user. That is drivers with a 90% score or higher for not having an accident, and 95% for obeying all the traffic regulations and rules while they are on the road.
So here is their angle. They plan to utilize the discovery of any fraudulent claims as a way to leverage their prices. That is, users will be recorded on how they drive using the app, and hence, the company will be able to determine the cause of the accident in cases where the claim is genuine.
Root, on the other hand, is introducing a policy that aims at targeting Tesla car owners. That is, owners will pay lesser insurance premiums as long as the car is used while in self-driving mode. This is according to data collected by the company, which shows that automated driving is much safer compared to humans driving.
Additionally, there will be a smartphone app put in place to have sensors that will gauge how a driver drives, plus where they live, and their current age. All this information will be used to calculate policy costs. However, much speculation has been brought up that such data could prove to be discriminatory.
That being said, quite a number of companies are approaching the new transition with a lot of positivity. A number of them have embraced the fact that technology is the future; employing the use of motion sensors and smartphone apps to make their insurance premiums a reflection of the situation on the ground.
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