I recently purchased a new car and was amazed at the electronics that operate so many components of this vehicle. The head lights turn on automatically as it senses darkness. There’s a backup camera that goes on when the car is put into reverse. There’s the automatic braking system that alerts me to the slowing vehicle ahead when it thinks I’m not braking soon enough. There are also blind spot and lane drift warning features. These are all controlled by electronics which are ultimately part of the onboard computer.  The scary part is that the future of auto insurance rates is also tied to that computer.

Like it or not, a science known as “Telematics” is surging forward. Telematics, in a broad sense, refers to any integrated use of telecommunications with information and communication technology. It is the technology of sending, receiving, and storing information related to remote objects via telecommunications devices for the purpose of making people’s lives, work, and business easier. Nearly all insurance companies are establishing a telematics rating program. Each operates under a different trade name but the principles upon which they operate are the same. It is “usage based insurance” rating or UBI. It is powered by in-vehicle telecommunications technology, or telematics. These telematics programs are factory installed “black boxes” in the newer model year vehicles, or it may be a self-installed plug in device connected to a port under the dash board of nearly all cars manufactured in the last 20 years.

These telematics devices measure a number of elements of interest to underwriters: average miles driven each day, rapid accelerations, hard braking, hard cornering, average speed travelled and speed fluctuations (commonly experienced when in heavy traffic). These devices can be programmed with global positioning technology to show where the vehicle is being driven. The new side, front, and rear sensors can record by millisecond the points of impact during a collision and some vehicles equipped with front, side and rear camera systems can actually show a multiple view of pre and post impact points during an accident. The car can give an unbiased explanation of your accident details potentially showing impact speeds, braking response, and a solid indicator of who hit who!

Insurance factors developed a fixed rate set at the start of the policy year, and it usually did not change until the policy renewal. The technology offered by telematics allows a company to adjust your premiums as your driving trends change during the policy year.

Usage Based Insurance (UBI) has experienced a surge in popularity during the Corona Pandemic. When your car sits home every day this week, you’d earn an adjustment. But the same is true when you make trips to Providence, Boston, or New York. Currently, when you do have to go into the city, traffic volumes are low compared to pre-corona traffic.  If you had UBI rating in place now, it would recognize the reduced daily travel, reduced frequency of stop and go driving. Your rates would be adjusted to your vehicle usage; meaning your insurance costs would likely be going down.  Those individuals participating in these programs generally have seen a 20-25% savings. There is a negative side to be aware of with UBI. As life gets back on track post Corona, if your travel increases you will need to remember that your rates will be reflecting your travel pattern at that time as well.

Progressive was one of the first insurance companies to promote its UBI program more than 10 years ago. They have the statistics that show drivers participating in the program feel a sense of control when their insurance costs are based on their personal driving habits; rather than being grouped with every Tom, Dick or Harry driving the roads with you. To keep their rates low, these drivers established improved driving habits that may have included slowing down and increasing their following distances to reduce the measured frequency of rapid hard stops and rapid acceleration.  Each of those being factors to reduce the frequency and severity of accidents.  Sounds like a win-win!

There is a big negative associated with these programs in that the practice of tracking mileage and driving behaviors through these UBI programs raises privacy concerns; “big brother is watching”. Are we giving up some of our rights to save a few dollars? Where I go and when is my business. The push back from consumers has prompted consumer groups, state legislatures and even the insurance companies to establish controls on what information they can use and under what circumstances.

Unrelated to the insurance piece, I’m also concerned about the controls on telematics privacy. What data could be collected by a smart programmer.  Could the “blue tooth” program in my cell phone be absorbed into the car’s computer and hacked from there? How do I protect myself from that?

This technology is here and likely to stay. As on-board auto computer systems and their related technologies expand, interest by insurance companies will expand. The aggressive driver will pay more while the defensive driver will pay less. The 16-25 year old will be rated by his or her driving activities rather than lumped along with all the other teen drivers. Accident fault will be assessed based on actual onboard computer data rather the descriptions of “he said-she said”. With proper controls, this is likely to be a positive advancement for the consumer.