Understanding Insurance Telematics Sometimes referred to as behavior-based insurance or usage-based insurance (UBI), telematics insurance policies are based on real-world driving data collected via telematics technology. By using actual data, custom insurance policies are created based not on traditional age, occupation and demographic expectations, but on real driver behavior from the person on the policy. It represents an innovative change in how insurance policy offers are developed, and offers improved risk assessment for insurers, and can help deliver lower insurance costs for careful drivers. How Does Telematics Insurance Work? The telematics data is usually collected by a device or dongle installed in the vehicle, however some newer solutions rely on a mobile app to track drivers in their cars. The data collected is used to assess driver behavior and build a risk profile, this includes the time of day the vehicle is most frequently used, speeds, but also looks for driving style too, such as hard braking or taking turns faster than average. The result is a risk level based off each individual’s real driving, so for careful drivers who are deemed a lower risk, it could save money. The Benefits of Telematics for Insurance Companies Telematics allows insurance companies to assess specific drivers in real-world driving rather than rely on statistical analysis of averages in age and other demographics. This offers several benefits: Accurate Risk Assessment — Because data is collected from the individual the policy is offered to, risk assessment for each policy is more accurate. Fraud Prevention — Collected data can quickly establish how events occurred during an accident, helping to prevent fraudulent claims. Tailored Policies — Consumers can be offered tailored policies that reward safe driving. Loss Prevention — Ongoing telematic data can be used to profile driver risks and provide guidance towards safer driving, reducing claims. Data Driven Decision Making — New product developments, pricing and more is based off real-world driver data for more accurate and effective strategic planning. How does Telematics Insurance benefit Drivers? Its not just insurers who benefit from telematics insurance, drivers do too, here’s how: Custom Premiums — If you drive safely, you are rewarded with cheaper premiums. Better Insurer Relationships — Insurers can provide feedback on driving patterns to help you be a safer driver, not just helping you stay safe, but rewarding those changes with better premiums and policies. New Insurance Products — With telematics data, new insurance products can be offered. One of these is a pay as you drive policy, which offers great value for many drivers. Conclusion By using an individuals real driving as the basis for risk assessment, and with it the cost of cover, telematics insurance offers more accurate offers for insurers, and a fairer system for drivers. As such, it represents significant change for the industry as a whole, opening the door to innovative new products while also improving the customer experience. It is such a different way to approach insurance, and brings so many advantages for drivers, that telematics insurance provides a true differentiator in the market today.