Decoding Telematics and its Impact on Car Insurance
Telematics-based car insurance is a constructive way of pricing insurance policies based on technology. Compared to the existing model of depending on contemporary and generalised data for underwriting car insurance policies, it will bend the scale in favour of depending on comparatively current data (if not real-time data).
The computer can collect data and send it to the server of the car insurance provider if your car has a telematics device built in it. It will be processed and evaluated there to give you a customised premium for car insurance. The speed at which you were driving, the idle period of the car, fuel usage, etc., for example, would be recorded and used for underwriting. At the time of the claim settlement, it is also helpful when the time, speed, braking, etc. can also be recorded and examined during an accident.
Telematics-Based Insurance Versus Traditional Insurance
Telematics-based car insurance, on the other hand, provides high-level personalisation. Telematics would be used to calculate the car insurance premium of a policyholder. The car will be mounted with a Black Box that tracks the driver's speed and distance travelled. The cost of car insurance can be determined depending on the use of the vehicle.
Telematics can monitor the usage data. In the core of the on-board diagnostic of the vehicle, the smart device will be installed. The smart device also tracks the type of routes taken, the exact time of the day, and the date. The details from the device will be transmitted by an app installed on the smartphone of the car owner.
Benefits of Telematics-Based Insurance
- Not only does telematics technology benefit insurers, but also policyholders:
- Real-time navigation, car tracking, and roadside assistance are the purposes of telematics.
- Telematics can be used to recover abandoned vehicles, help drivers make safer roads, and save on fuel and repair costs as well.
- It will allow motor insurance providers to properly segregate consumers depending on each individual's risk evaluation. Telematics can assist companies in reliably estimate damage due to an accident and minimise fraud by examining a customer's driving history.
- The real-time location of their cars can be shared with others by drivers.
- If the driver breaks the speed limit with a warning, car owners will be alerted.
- In the event of a road collision, via the telematics software, the driver of the vehicle may seek roadside assistance.
Insurance based on telematics is still in its nascent stage in India. In the market, there are technical, regulatory, and privacy-related problems. With respect to the use of telematics technologies in car insurance, there are some issues, such as the appropriation of the data gathered by the provider or the retailer, the expense of installing the system, and the poor demand in the country for usage-based insurance.
In India, only one leading insurer of car insurance provides usage-based insurance as of now. The insurer delivers the Telematics-based device free of charge to consumers who buy add-on covers from the provider, such as personal accident cover, key replacement cover, etc.
The route ahead for telematics-based car insurance would be decided by the approval of IRDAI regarding legislation, the approval of policyholders when it comes to exchanging data, and the purpose of insurers concerning the privacy of such data.
The premiums for insurance (life/health) are determined based on the criteria, age, lifestyle behaviours, ethnicity, and medical background of the applicant. With Telematics, the same principle can be extended to car insurance premium estimates. Here, based on real-time details such as the distance travelled, driving patterns, and use of the vehicle, the amount of premiums can be estimated.
Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.