Insurance premiums are priced, based on several different factors like age, gender, location, vehicle make, model, type, power output, driving record factors like accidents, claims etc. Insurance providers use these factors to even classify the driver. So if you are a young woman driver who drives a sports car then be ready to blow a hole in your pocket paying your insurance premium. The system does not check whether you are actually a safe driver or not because the system just simply cannot do that check. On the contrary, if you are a reckless driver but have been fortunate to have not had any accident, then the system classifies you as a safe driver and only demands a lower
premium. Even though you have a very high chance of meeting with an accident, the system still marks you as a safe driver. The system is not fair because the system does not really have any insights into your actual driving habits. This is where a mobile application can make a difference.
Those people who claim that they are safe drivers, than what the insurance company states, can enroll in a “Usage Based Insurance” program where the insurance premium would be determined by the way the driver actually drives. This new system would track the driver on a day-to-day basis. The system gets real-time insights into the driving habits of the driver and uses these insights for creating the driver’s profile. So now instead of judging whether you are a safe driver based on your age, gender, car etc., you are judged based on how you drive your car. Now the million dollar question is how is this possible?
This is where we put our smartphone to use. Insurance companies can provide a mobile app, that the drivers can download and install on their smartphones. The drivers will have to sign-up in the app and enroll for the “Usage Based Insurance program”. Once enrolled, the application would continue to run in the phone and keeps track of the driver activities. The app will be able to sense whenever the user starts driving. This would trigger a series of checks and the application would continuously check various driving parameters like acceleration, speed, location, braking, weather, time of the day, distance etc. In addition to this the app can also check whether the driver is texting or making or answering calls while driving. By using an Apple watch or other trackers, the app can even measure the variations in blood pressure while the driver drives. All these parameters give valuable real-time insights into the actual driving habit of the driver. All these real-time information can be relayed to a server on the cloud instantly over REST APIs. An analytics engine can consume this data and do a real time safety ranking of the driver.
Another side of this program would be driver education and awareness. By analyzing the braking pattern the system might be able to predict whether the driver is driving so close to the vehicle in front. If the driver is over speeding then the app can advise the driver to slow down and reduce the risk of accident. The Analytics Engine that runs on the backend can even predict an impending accident by comparing the driving style with previous accidents and warn the user. Therefore the app can act as a means of improving the driving habits of drivers and also helps to keep the roads a much safer place.
Insurance companies can also use this technology to come up with various pricing models
- Pay as you drive(PAYD): The more miles you drive, the more you pay. The system can measure how much you drive precisely.
- Pay how you drive(PHYD): Looks at the overall driving habit. Safer the driver lower the premium
- Pay as you go(PAYGO): Drivers just pay for the trip they take. Pay an advance, take the trip, pay the premium for that trip.
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