What is Usage Based Insurance?
Usage Based Insurance (UBI) uses in-vehicle technology to identify driving risk. This technology will either be an installed device in the vehicle or an app on the driver’s phone. UBI provides the ability to charge for auto insurance based on actual use of the vehicle by the driver.
What is Usage Based Auto Insurance?
Commercial Auto Insurance is a logical area where pricing can be determined by actual driving. Early UBI initiatives focused on personal markets with an installed device (typically an OBD device) which would collect data on speeding, miles driven, and acceleration and braking. These early solutions were aimed at consumer markets and provided on an “opt-in basis”.
Commercial UBI has since evolved, focusing on using telematics technology,camera usage, and phone apps to identify and correct risky driving behaviors. These safety solutions also work as a claims settlement aid providing visual evidence (dash cams and as an enhanced behavior training aid. Commercial auto UBI typically requires full participation of all drivers in order to be effective. Therefore, any required technology must be mandated for use by fleet management.
How Usage Based Insurance Works
Fleets work with their insurance company to determine current insurance pricing based on lowered exposure to risk caused by management of an effective fleet safety program. In addition to improved insurance pricing, insurers may decide to make technology available on a more desirable financial basis to insured fleets.
The Automotive Usage Based Insurance Market Today
Compared to personal lines of insurance, commercial auto insurance is in its infancy. Insurers are seeking more insightful means of determining risk exposure (and thus perceived eventual accidents and losses) by using phone app technology or dash cam installations.
Examples of Usage Based Insurance
Two common auto insurance related concepts are PHYD (Pay How You Drive) and PAYD (Pay as You Drive). PHYD evaluates driver risky behaviors, typically related to speeding, hard accelerations and hard braking while PAYDfocuses on the amount of miles driven under the premise that risk determination is strongly correlated to miles driven.
Advantages of Usage Based Insurance
The clear appeal of User Based Insurance is that if you drive less, you should pay less for your insurance compared to a driver who drives more. In addition, a driver who drives more safely should be paying less than a more dangerous driver.
Disadvantages of Usage Based Insurance
Not everyone can win in a game where advantage goes to those that prove they are safer drivers or operate a safer fleet. Poor user based insurance insights may cause the insurer to cancel insurance or raise rates or non-renew at renewal time.
Future of Usage Based Insurance
As commercial insurers struggle to be profitable with increasing accident rates and related claims, they are seeking to exploit technology to provide the basis for segmentation of their insureds. This allows insurers to price insurance appropriately and determine who the more desirable insureds are.
How Does LifeSaver Mobile Help Reduce Costs Associated with Usage Based Auto Insurance?
LifeSaver Mobile provides an outstanding, proven, low cost tool to address both the frequency of accidents (more cell phone distraction invariably leads to more accidents) as well as the severity of accidents (by managing speed). Lower frequency and severity will ultimately lead to the best possible insurance outcomes for the fleet.
