Car Insurance Today
With accelerating advancements in the InsurTech space, there are many new opportunities opening up to car insurance companies which can more accurately calculate risk and streamline claims processes leading to lower premiums, and ultimately, happier customers.
Today, insurance premiums are chosen based on a series of criteria, including the car model, driver age, and driver history. While calculations are made based on factors such as driver age, location, and history, they are quite coarse, and to some may feel like arbitrary decisions made by insurers providing a “best guess” as to the risk associated with insuring a certain individual. This method can lead to unfair profiling of certain groups of drivers, especially young people who are traditionally perceived as vulnerable or reckless road users. With this comes an increased cost of premiums for those groups.
What’s more, the insurance industry caters mainly to the older generation of long-term car ownership. After all, this group has the most drivers and constitutes the largest customer base of many non-specialist insurance companies. This can make it quite inaccessible to younger drivers, who can be stuck forking out thousands each year to insure their cars even though they may not use them as frequently as their parents’ generation.
The reduced accessibility of driving for younger people may be behind the decline in the number of younger road users in the past few years, which has been well documented. Driving is perhaps no longer being seen as a universal right, but a luxury afforded to those wealthy enough, or an economic burden borne by those who have no choice but travel by car.
Luckily, some insurance providers have identified this problem and are offering innovative solutions to this mounting challenge.
InsurTech innovators are creating solutions to the challenges presented by modern insurance. Not only are fewer young people driving, but the nature of driving is also changing. As with the rise of public bicycles, new services such as car sharing schemes (e.g. ZipCar) mean that people don’t necessarily want or need annual car insurance, and would rather opt for flexible insurance products that can offer them same-day daily or even hourly coverage (e.g. cuvva). This is slowly turning the traditional industry on its head, and it’s not the only service being offered by cutting edge InsureTech companies.
InsurTech is becoming bolder and more creative, with options such as paying by the mile (metromile), and the shareconomy approach (friendsurance) allowing for crowd sourced car insurance that offer money-back schemes if no claims are made. While these innovative approaches cater to changing attitudes to driving, they do not necessarily tackle the problem of cost for those who do require insurance on their cars on a daily basis.
Although the convenience of being able to turn car insurance on and off at the touch of a button will appeal to some, the majority of drivers will still require year-round insurance as they commute in their vehicles. Crowd sourced insurance schemes might reduce costs for some, however we can’t know that this insurance structure will hold up on a larger scale. These caveats come hand in hand with most innovations, however some technologies that have been around for sometime have undergone serious development and may be the answer to our car insurance needs.
Telematics, or using black boxes to record driving and accident data, has been in use in the insurance industry for years. It originally targeted younger drivers to lower their premiums, and determines the safety of individuals’ driving, adjusting prices accordingly. Now, it is increasing in popularity fastest amongst middle-aged road users, as more people are becoming aware of the benefits of having a blackbox on board.
Rather than disrupting car insurance, telematics aims to bring the industry up to date with current technological standards by determining how safely people drive. Now, insurers can accurately and fairly calculate premiums based on each individual’s personal driving history, as recorded by the telematics box rather than chosen arbitrarily based on factors such as age and postcode.
InsurTech innovators are taking this one step further, however, and streamlining the insurance industry to further reduce processing times on claims, and reducing loss to fraud. This will ultimately reduce costs and premiums, meaning insurance companies and road users will benefit.
Insure Telematics Solutions (ITS) is an InsurTech company doing just this, creating software that collects driver data including acceleration, cornering, and GPS location to calculate a driver’s premium. ITS goes one step further, however, with its innovative crash algorithm, and incident report features. This determines the exact cause and force of the crash, and compiles a comprehensive report that includes the car involved, the severity of the crash, and the location of the vehicle during the incident.
Adam Gooch, commercial director of ITS, believes telematics is the foundation of future car insurance process and claims.
He said, “The mainstream automotive insurance industry must look into new technologies if its players want to remain relevant in years to come. With premiums increasing year-on-year, car insurance could become more unaffordable to the average driver. Insurance companies need to continue to be proactive and forward thinking. It is essential they embrace current technologies to ensure that car insurance and driving remain accessible to everyone.”
The technology behind ITS’s crash algorithm is built on data from thousands of incidents, which allow it to accurately determine the cause of a crash. The algorithm uses Microsoft Machine Learning, constantly adapting and becoming more accurate as it is fed more data.
Car insurance is slowly adopting technology, and with advances in technology in the insurance space, the industry is going to have to adapt quickly and learn to incorporate innovative InsurTech solutions into the existing insurance framework in order to maintain efficient services, and keep customers happy.