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Connected car data helps auto insurers refine risk

To price an auto insurance policy for a family that includes drivers sharing multiple vehicles, insurers often need to assess risk by averaging it across the family and vehicles.

“It works, but they can do a better job if they know more about who is driving what vehicle, how far it was driven, and how the vehicle was driven,” Bill Kremersenior director of connected cars at Cambridge Mobile Telematics (CMT), said PYMNTS.

Cases like this have contributed to the growing adoption of usage-based insurance policies that use telematics to share data with insurance companies about vehicles and how they are driven. The more sources of data insurance companies have, the more accurately they can assess risk.

More consumers are opting for data sharing because they find they save money when they can prove they are driving safely.

“It represents a way for the insurer to really refine the risk and provide the right price for this family,” Kreamer said.

Using Multiple Data Sources

CMT provides the technology and certain user experience elements to insurance companies who include it in their usage-based auto insurance for policyholders. To collect risk pricing data, the company has long used drivers’ smartphones, proprietary beacons — Bluetooth-enabled devices that stick to the windshield — and other devices.

Now it has added another data source for its DriveWell Auto telematics platform: connected cars.

Each device can provide different types of data. For example, smartphones show which driver is driving the car on each trip, beacons capture the 15% to 20% of trips made without a mobile phone in the car, and connected vehicles provide odometer readings and location data to that the insurer can correctly price the risk linked to location.

“Insurers are looking at every possible way to collect this kind of data, and they have a bunch of options,” Kreamer said. “Increasingly now, the vehicles themselves are connected to the internet and are an option for collecting data.”

Provide a consistent experience for policyholders

By bringing these different options together, insurers can not only combine the different sources of data to assess risk, but also provide a consistent experience for their policyholders, so the program will look the same to the policyholder regardless of the devices they have activated.

About 15% of vehicles in circulation are connected, and this share is increasing.

For insurers, these provide better data on vehicle dynamics and which safety systems are activated, Kreamer said. For consumers, they provide another way to participate in usage-based insurance programs. It’s also easy to join – they click on a message that appears on the car’s infotainment screen asking if they want to join.

“It’s a really easy experience, and for consumers, it represents another way for them to be able to take advantage of the safe driving discounts that are there to prove they’re a safe driver,” Kreamer said.

Encourage safer driving behavior

These programs have grown significantly, especially over the past three to five years, Kreamer said. Today, every top 10 insurer has a telematics program.

“Insurers intend to expand broadly,” Kreamer said. “They see there’s a lot of value in that data being used in all of their systems, whether it’s helping people get a discount because they’re safer, encouraging them to be more safe and change their driving behavior, or use them in the claims process.”

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