What is Connected Car Insurance?

Encourage Safer, Smarter and Greener Driving Behavior

What is Connected Car Insurance? 

Connected car insurance is a technology-driven automobile insurance leveraging the Internet of Things (IoT) whereby insurance premiums are dependent on driver behavior. Connected car insurance programs are intended to reward and promote safer and smarter driving behavior, while enabling auto insurance customers to receive potential discounts and savings to their monthly premiums based on individual driving patterns calculated by their insurer of choice.

How Does Connected Car Insurance Work? 

Today, many insurance carriers are offering connected car insurance by providing the driver with a physical device (OBD II) that plugs into their vehicles agnostic system, or by a mobile application that is run through a smartphone. Both have the ability to record data about driving behaviour and send the information to the insurance provider. In some instances cars are already equipped with OEM connected car systems, such as GM’s OnStar.

Are there any Concerns around Data Collection and Privacy?

Connected car insurance programs go through a regulatory process before being introduced to a market to help ensure all personal information that is collected is in line with privacy legislation. The purpose behind connected car insurance is to offer premium discounts to consumers based on individual driving patterns. This data collection is voluntary and consumers are fully informed of the variables the insurer collects for use in the program. Data is not used for any other commercial purposes without consent.

What are the Different Types of Data collected through Connected Car Insurance?

The connected car offers accurate insight into driving behaviour, and allows insurers to determine insurance rates on actual risk versus perceived risk, which has historically been used. The technology allows for insurers to monitor how and when a person drives, which will in turn allow them to gain valuable insights on their customer base, helping in the development of innovative insurance solutions, improved customer experience and specific products.

Here are some of the unique pieces of data being collected to help insurers assess driving habits:

  • Hard Acceleration or Braking – hard acceleration or braking is applying more force than what is required normally to the vehicle’s brake or accelerator
  • Distance Traveled – basing the premium on how much a consumer actually drives versus stated distance
  • Time of Day Driven – this is important, as people who do most their driving at night are considered higher risk for accidents
  • Harsh Cornering – applying excessive force when manoeuvring corners while driving
  • Speed and more – the act of exceeding speed limits higher than what is safe or legal, and other unsafe manoeuvres

Given the on-going importance of this data to promote safer and smarter driving behavior and the industry lead support for connected car insurance by insurers, TSPs (Telematics Service Provider), and OEMs as they continue to invest in developing and deploying this technology, the term connected car insurance has also been referred to as usage-based insurance or telematics insurance.

What are the Benefits of Connected Car Insurance? 

Using connected car insurance both personally or commercially can carry distinct benefits leading to competitive and more fair and accurate pricing of insurance policies. What once was calculated based on gender, age and vehicle colour will now be based on actual data. Drivers who will benefit the most will be those who exhibit better driving habits or improve their driving behaviour, typically drivers who avoid harsh braking, driving at high speeds, and travelling late at night, with the reward usually being a reduction in insurance premium. Other benefits include reductions in congestion, traffic accidents, pollution, maintenance and fuel costs. Most insurers are offering the information collected to the driver using a portal or personalised webpage, this information can also be used by the insured as a learning tool to become a better driver.

Although the term “connected car” seems relatively new, the services provided by them are well known; services ranging from the commonplace GPS navigation and hands-free cell phones, to roadside assistance and weather updates, the connected car is the biggest innovation in the auto industry today.