Insurance News

Car Insurance: Is Real-Time Surveillance the Next Step?

May 15, 2015 - Benjamin Manz

For decades, insurance providers have, to varying extents, customized their premiums based on numerous individual factors. These include age, gender, place of residence, health condition (in life insurance and health insurance, for example), property value (in household insurance) and many more.

Additionally, discounts may apply based on memberships in partner organizations, taking out long-term policies and claim-free driving. The logic behind the latter is that accident free drivers present less risk to the insurance provider.

We’ve witnessed the ongoing customization of premiums in the insurance industry, and nowhere has this been more pronounced than in car insurance.

Aside from solutions that help insurers determine the at-fault party, other factors also play a role. These include the ability to obtain larger amounts of more precise data about policyholders. The data gathered can then be applied to create new sources of revenue.

Car insurance: personalized premiums

The car insurance industry has long been far ahead of other insurance sectors where personalization of insurance premiums is concerned. Premiums already vary depending on car type (brand, make, model), age, gender, nationality, place of residence and many other factors.

Insurance statistics are already able to accurately provide information showing the likeliness of a specific driver causing an accident. Drivers younger than 25 years old, for example, are more likely to be involved in accidents than older drivers. As a result, young drivers pay marked-up premiums.

Car insurance with collision recording equipment offered

Event data recorders (EDRs) and tachographs have been in use in various countries since a long time. But Swiss car insurance providers, including AXA Winterthur, have also begun promoting data-collection devices in recent years.

In the case of an accident, recorded data provides information which can be helpful in performing an accurate analysis. These data-collection services are particularly promoted to young drivers. At AXA Winterthur, for example, young drivers receive a 15 percent discount on premiums if they agree to install an EDR. Insurance companies bank on the installation of tracking devices leading to lower costs and fewer accidents by “encouraging” careful driving.

Will data-collection devices soon decide your insurance premiums?

Tachographs take data collection much further than EDRs because they precisely measure and record your car’s speed and movements. When a GPS device is coupled with the tachograph, the exact location of your car can also be tracked at any time.

In the future, digital tachographs may well become the standard in Switzerland, as they have elsewhere, in spite of major data protection concerns. AXA Winterthur has already launched a device which it markets as the “Drive Recorder”.

Other insurance providers like Mobiliar and Vaudoise are testing similar devices which track the exact location of your vehicle in real-time. The benefits seem obvious: In the event of an accident, the circumstances leading to the collision can be more accurately reconstructed. There’s also a chance that, in theory at least, an ambulance would be able to find your location faster.

But insurance companies are flirting with more ambitious ideas. In the future, your insurance premiums may be based on your driving behavior, driving frequency and the routes you choose to take.

Accurately comparing premiums ahead of signing up for a policy will become even more difficult. Additionally, the data collected by insurance companies may affect the premiums you pay for other products, like life insurance. Big data and analytics have reached the insurance industry, with all the advantages and disadvantages that come with them.

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Expert Benjamin Manz
Benjamin Manz is CEO of and an independent expert on banking and finance.