{"id":14852,"date":"2015-08-19T12:33:09","date_gmt":"2015-08-19T09:33:09","guid":{"rendered":"https:\/\/insly.com\/?p=14852"},"modified":"2023-08-18T11:32:32","modified_gmt":"2023-08-18T08:32:32","slug":"innovation-key-to-ideal-usage-based-insurance-solutions","status":"publish","type":"post","link":"https:\/\/insly.com\/en\/blog\/innovation-key-to-ideal-usage-based-insurance-solutions\/","title":{"rendered":"Innovation Key to Ideal Usage Based Insurance Solutions"},"content":{"rendered":"
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Usage-Based Insurance, otherwise known as telematics-based insurance, is rapidly becoming a global phenomenon. Already commonplace in Italy, the United States and the UK, a number of new markets have recently experienced a growth in the adoption of UBI. These include the likes of Japan, South Africa, and Brazil. In many countries across the world, UBI will be used as an effective method of breaking against established players within the global motor insurance market. It will be a substantial recruitment tool with the potential to win profitable customers, as we forecast that over $60billion of automotive premiums will be generated by the Usage-Based Insurance market by 2020.<\/p>\n

What is usage-based insurance?<\/b><\/h3>\n

Usage-based insurance<\/b>\u00a0(UBI) also known as\u00a0pay as you drive (PAYD)<\/b>\u00a0and\u00a0pay how you drive (PHYD)<\/b>\u00a0and\u00a0mile-based auto insurance<\/b>\u00a0is a type of\u00a0vehicle insurance<\/a>\u00a0whereby the costs are dependent upon type of vehicle used, measured against time, distance, behavior and place.
\nThis differs from traditional insurance, which attempts to differentiate and reward “safe” drivers, giving them lower premiums and\/or a no-claims bonus. However, conventional differentiation is a reflection of history rather than present patterns of behaviour. This means that it may take a long time before safer (or more reckless) patterns of driving and changes in lifestyle feed through into premiums.
\nThe simplest form of usage-based insurance bases the insurance costs simply on the number of miles driven. However, the general concept of\u00a0pay as you drive<\/i>\u00a0includes any scheme where the insurance costs may depend not just on how much you drive but how, where, and when one drives.
\nPay as you drive (PAYD) means that the insurance premium is calculated dynamically, typically according to the amount driven. There are three types of usage-based insurance:<\/p>\n

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  1. Coverage is based on the\u00a0odometer<\/a>\u00a0reading of the vehicle.<\/li>\n
  2. Coverage is based on mileage aggregated from GPS data, or the number of minutes the vehicle is being used as recorded by a vehicle-independent module transmitting data via\u00a0cellphone<\/a>\u00a0or\u00a0RF <\/a>technology.<\/li>\n
  3. Coverage is based on other data collected from the vehicle, including speed and time-of-day information, historic riskiness of the road, driving actions in addition to distance or time travelled.<\/li>\n<\/ol>\n

    The formula can be a simple function of the number of miles driven, or can vary according to the type of driving or the identity of the driver. Once the basic scheme is in place, it is possible to add further details, such as an extra risk premium if someone drives too long without a break, uses their mobile phone while driving, or travels at an excessive speed.<\/p>\n

    Telematic<\/a>\u00a0usage-based insurance (i.e. the latter two types, in which vehicle information is automatically transmitted to the system) provides a much more immediate feedback loop to the driver,\u00a0by changing the cost of insurance dynamically with a change of risk. This means drivers have a stronger incentive to adopt safer practices. For example, if a commuter switches to public transport or to working at home, this immediately reduces the risk of rush hour accidents. With usage-based insurance, this reduction would be immediately reflected in the cost of car insurance for that month.<\/p>\n

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    Potential benefits<\/h4>\n<\/div>\n