Is the Internet of Things Making Driving Cheaper?
Leading auto insurers like State Farm, Progressive, and Allstate have begun using the Internet of Things to monitor and analyze their customers’ driving habits, including how often they drive, changes in speed, and even the time of day they operate their vehicles. While this may come as a surprise to many consumers, the Internet of Things is slated to reduce insurance costs for good drivers. But how does it work, exactly?
What is the Internet of Things?
The Internet of Things (IoT) is a concept that refers to the connection devices share with the Internet and with each other. The “things” in IoT are the people and devices that can be connected, either those that are already connected or those that can theoretically be connected with improved technology. As Wi-Fi capabilities increase, even devices such as coffee makers and lamps will be connected with integrated on/off switches, providing access to their controls via other devices. An example of this that is already being widely used is the ability to arm your home security system from your smartphone. As technology advances, consumers will be able to monitor and control a wider variety of everyday objects using internet connections.
What does the IoT trend mean for auto insurance companies? If everyday objects have network connectivity, are there high-tech ways to lower your insurance costs? And how can you expect to pay and shop for insurance in the future?
Technology Helps You Prove You’re a Good Driver
IoT companies such as CalAmp Corp. have designed policies around usage-based insurance or UBI. This is a pay-as-you-drive concept that focuses on mile-based insurance measured by factors like distance driven, driving behaviors, time, and place. CalAmp is leading the way with various automotive telematics devices that utilize accelerometers, GPS, and your own car’s onboard diagnostics system. This technology allows insurance companies to more accurately measure your vehicle’s usage. They can also analyze your driving skills – specifically how hard you brake, how fast you accelerate, and how sharp you’re turning corners.
What Does This Mean for Consumers?
IoT-based technology can help prove your safe driving habits so that the more safely you drive, the cheaper your insurance premiums will be. You may even be rewarded with a lower rate since these devices can offer roadside assistance, accident data, crash detection, and even vehicle tracking and recovery in the event that your car is stolen. Current auto insurance rates are based on factors like age, vehicle, and driving history, but insuring drivers is still a gamble for the insurance companies. Having more concrete evidence that you’re a responsible driver will allow them to offer you lower rates.
Usage-Based Insurance is Still in Its Infancy
It’s no secret that usage-based insurance is still new, and the majority of consumers aren’t even aware of its existence. Still, it’s been estimated that 155 million North American cars on the road are compatible with certain onboard diagnostic technologies.
We’re still taking baby steps, but advancements in car safety and integrated diagnostics mean we’re headed for a new technological age where car insurance will be much cheaper for the best drivers.