The Future of Telematics in Car Insurance

The story behind telematics begins in the early 1960s at a time when tensions between the United States and the former Soviet Union were at their highest. The U.S. government, intent on national security and worried about a nuclear threat, funded the development of global positioning system technology. Initially, GPS was intended for military and intelligence applications. But a decade later, the concept of GPS for civilian applications became a reality. When that happened, the seed was planted for the idea we know today as telematics.

“Telematics” as a phrase was coined in an obscure technology development report in 1978. In the decade that followed, major research programs were created to experiment with vehicle telematics, with the objective of improving road safety and reducing environmental impact. By 1993, GPS technology had reached the consumer market. That’s when the U.S. government offered full GPS access to civilians.

By the early 2000s, telematics technologies were used enterprise-wide in web-based fleet management systems that featured real-time information updates to remote networks. Soon, the consumer market became flooded with GPS-based vehicle navigation systems.

Vehicle telematics combines GPS systems, onboard vehicle diagnostics, wireless telematics devices, and black box technologies to record and transmit vehicle data, such as speed, location, maintenance requirements and servicing, cross-referencing this data with the vehicle’s internal behavior. This information can be used in real-time analysis to improve overall driver safety and reduce insurance costs.

According to Statista, by 2030, 70% of light-duty vehicles will be connected to the internet. This provides the potential for cars to be connected to smart cities, enabling them to communicate with traffic management systems using Artificial Intelligence (AI) and Machine Learning (ML).

Car/Fleet insurance and telematics:

However, in today’s auto and fleet insurance environment, the majority of insurance carriers have online applications that allow tracking drivers’ performance, which can make the insurance rate more accurate as your own driving behaviors drive “your rate” vs. being placed in a pool of similar drivers.

How it works:

Insurance telematics bases insurance premiums on the way in which people drive rather than on traditional static measurable data, such as age and gender. Data is collected in the vehicle through original equipment manufacturer parts installed when the car is manufactured. Installation can also be accomplished via your cell phone through Bluetooth capabilities or by plugging a telematics device into the dash.

What it looks at:

Hard braking, hard cornering, time of day driving, miles driven daily, etc. are all factors that are looked at in the eventual outcome of “individual driver rate.”

Potential outcomes from a cost savings standpoint:

Most companies give a 5% to 10% discount at inception of the policy (generally the first annual term) and then apply a renewal discount of 0% to 25% depending on your scores. The good news is that you can monitor your driving results as you go using your mobile phone, iPad or computer. That way you can make necessary adjustments to your driving habits.

AAA Ohio recommends you consider these devices as not only a way to reduce your insurance costs but also to get the coaching to become a safer driver and prevent accidents.

For more information about AAA Insurance, call (800) 323-5490.

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