A New Model For Vehicle Insurance
No longer a tech term or a phrase only used by those software nerds at school, the Internet of Things is here and is about to completely change the world of insurance. First up a quick review of what Internet of Things is all about.
Recall that Internet of Things refers to what is essentially an interconnected network of real world objects all communicating with each other in real time. Internet of Things puts microelectronics, sensors and even software into ordinary everyday objects to establish this network. That’s fine as far as it goes, but so what?
How about a new model for your insurance needs? If you stop for a minute and think about it you will clearly see this makes perfect sense. Up until just recently the price you paid to insure your vehicle was based on a myriad of factors. These factors are assembled and fed into propriety software systems that spit out a number that in theory represents a number that makes sense for you and your insurance company.
Remember that there are quite a few variables at play here. There is the estimated cost to repair or replace your vehicle should you be involved in an accident. Not to mention the need to forecast medical bills for you or others should an accident occur. At the same time, the insurance company knows it has to price the insurance policy such that it is affordable to you and represents a profitable number for them. It is no wonder that Insurance Carriers are looking for new models to price their coverage.
One new pricing model that is just now starting to be embraced is one that is being called Usage Based Insurance (UBI). UBI makes used of special Internet of Things (IoT) sensors. These IoT Sensors are deployed (installed) in and around the vehicle being insured. Then these sensors report in real time your driving habits. The sensors are designed to record your driving patters such as speed, acceleration, the use of turn signals and even the force you use when applying the brakes.
Then all of this data is compiled and sent back to the insurance carrier. Your new policy will then be more fairly based on your driving patterns instead of based on aggregate population statistics as is used today.
If you think about it, this only makes sense. Now modern technology offers a solution to reward the good drivers and financially penalize or not even cover the reckless drivers.