Importance of IoT in Auto Insurance

The car industry in India functions on tried and tested methods. These are the methods of claim settlement, premium calculation and renewal. From the beginning of the industry till now, these have remained standard for decades.

Insurance companies fix premium rates for car insurance based on a number of factors. This is inclusive of the customer’s age and gender. It also includes her customer’s driving history, area where the vehicle was registered, the car’s make and model, and more. They also take into account the engine capacity! After evaluating all of this, the insurance company, nor the car insurance company to be specific, ascertains the risk posed by the customer to the company. Is the customer a Safe Driver? If so, then there can be a possibility later on that the customer may be at fault during a road accident.

Indian car insurance domain is one that has been introduced to the usage-based insurance technology. This is a facility that makes it possible for a telematic device in the insured vehicle to let the agency monitor the customer’s driving habit. If an accident, for instance, is not the fault of the customer, he/she can ask for the insurance. But if the company does know that the customer’s driving habits are not sound at all or the driving habit is reckless, then in the case of an accident when the fault is of the customer, the company is not liable to give anything. This is where this technology is so useful.

But, as we shall know down in the article, this has benefits for the customer as well.

How does this work?

Usage-based car insurance used IoT. Yes, this is where the Internet of Things comes in! This technology, as we have said, is used to evaluate the driving habits of customers. If there’s a customer with a bad driving habit, the insurance company may even cancel their service. Of course, that is a rare and extreme case, but it may happen. The driving behavior and the mileage is tracked from the odometer, or from an installed telematics device. This device measures:

1. Distance driven

2. Time of the day

3. Locations driven to obtained from GPS

4. Cases of sudden braking

5. Increase in speed

6. Hard cornering

7. Deployment of airbag

As you can see, this wealth of data goes all the way to your car insurance company. A customer may lie after an accident that it was not due to his/her sudden hard turning, but if the evidence from the device tells otherwise, the insurance company will not be liable to give anything for damages. This ensures that drivers drive safely. 

Impact of Internet of Things on the Auto Insurance Industry

Traditionally, when assessing the risk posed by a customer, the focus was on the vehicle rather than on the driver. After all, the risk posed by the driver could not be ascertained. But with the use of IoT, all that is possible. This technology will, very possibly, rule the auto insurance industry in the future.

Now look at the benefits, both to the insurance company and to customers.

Benefits to a car insurance company

1. Insurers are able to manage the pre-sales and post-sales services better while mitigating risks effectively.

2. The driver’s risk assessment is more accurate now.

Benefits to the customer

1. Insurance companies determine the cost of car insurance for a customer based on things like average speed and use of brakes. Such data is now accurate thanks to the new IoT technology. This means that companies shall be fairer to good customers and safe drivers. Low-risk drivers can also get car insurance easily.

2. Customer satisfaction is boosted by an improvement in transparency.

3. Driver’s behavior is improved as a good driver is given rewards like lower premiums. Drivers also learn to use safer driving habits.

4. Safer driving habits lower cases of road accidents, congestions and vehicle emissions. 

Telematics, when used to IoT, is a fantastic change that is changing the face of the auto insurance industry worldwide. Companies using this technology stand to gain a lot, and customers are benefited likewise.