Usage-based vehicle insurance (UBI) uses individualized data gathered by IoT sensors to determine insurance premiums, rather than the traditional approach, which leverages statistics to determine the risk factor of a particular driver. UBI systems monitor a driver’s adherence to safe driving techniques and account for the number of miles a car is regularly driven to calculate premiums, often with large rates of savings for drivers.
UBI offers drivers more control over their insurance premiums, incentivizes safe driving, and generates opportunities for vendors to generate customer loyalty through regular contact. As telematics (the hardware and software used to monitor driving activity) become more affordable, the global usage-based insurance market is expected to reach $190 billion in US dollars by 2026.
UBIs work by installing a telematics device – that either plugs into the insured vehicle or is loaded as an app onto the driver’s smartphone – to measure the number of miles driven and to monitor the driver’s behavior. By monitoring things like sudden acceleration or braking, hard turns or collisions the system can flag unsafe driving behavior, end alerts in the event of an accident, and track the car in case of theft.
Key Benefits of IoT-Enabled Usage-Based Vehicle Insurance
- Gather precise data to support the assessment of claims, reducing fraud, and driving down costs.
- Enhance customer loyalty through regular contact.
- Open up possibilities for sales channels and opportunities to generate revenue through partnerships with other businesses (like reward programs for safe driving).