Telematics – Measuring Driving Skills

An article in the Wall Street Journal discussed the Allstate insurance company lobbying to align car insurance premiums to driver skills. According to the article, many customers are not happy that their vehicle insurance rates are tied to, among other metrics, their credit score.

In a LexisNexis Usage-Based Insurance study, almost 9 in 10 drivers (88%) said they prefer auto insurance pricing based on their actual driving habits. Also, another 71% of drivers noted that they think telematics, including driving behavior data, are among the fairest ways to set a price for insurance if they perceive a benefit.

By monitoring drivers’ behavior, the insurers can track data and tailor insurance rates to their driving habits. But many are not happy about using a telematics system that can track how they drive, where they have been, and when they were there. We are not sure how, if at all, telematics is good for the secure transportation industry.

So, what are the telematics measuring?

Telematics devices collect and measure data related to driving habits and behaviors. This includes:

  • How many miles a car is driven per day, week, or month. The more time you spend on the road, the more likely you are to be involved in an accident.
  • What time of day does the car tend to be driven? The nighttime accident rate is much higher at night than it is during the daylight hours.
  • How well or poorly the car is driven. Sudden braking, sharp turns, and violating traffic rules all increase your risk of getting into an accident.

Be aware that if you have very poor driving habits and sign up for a telematics-based insurance policy, you could be penalized with higher rates. That includes those who speed, take corners too aggressively, brake too quickly and drive long distances, or mostly at night. Our question would be – what is the definition of “aggressive driving.”

Telematic devices can monitor and inform drivers of things such as:

  • Car speed
  • Vehicle position
  • Trip length and distance
  • Hard braking
  • Seat-belt usage
  • Fuel usage
  • Engine acceleration
  • When you drive

ISDA opinion that it should not be called measuring driving skills – it more measuring driving habits.

For the corporate community, I’m not sure if the cost is a factor, but the private provider of Secure Transportation services could be a way to decrease overhead. From a security standpoint, we don’t see it being a good idea. There are enough devices that can determine when and where you and the principal will be.

Also, the question we have is who owns the data the device collects. Some of the insurance companies “guarantee” that the information remains with them.

If interested, we suggest googling Vehicle insurance and telematics.