Today’s younger drivers are more open to purchasing usage-based car insurance, leading to a rise in the utilization of telematics. According to Nielsen metrics, millennials are 44% more likely than the average consumer to use a device from insurers to track driving behaviour to avail premium discounts. Upper-class millenials, those with income above US$75,000, are 79% more likely to opt into these policies.
Usage-based insurance typically offers discounts based on the following behaviours: mileage driven, braking activity, driving speed, and time of day driven. With the abundance of data, insurers are able to analyse real-time rather than rely on predictive risk models based from outdated, old statistics.
Despite the potentially cheaper insurance premiums, customer acceptance is quite a hurdle for usage-based policies. There are still consumer concerns regarding privacy, car malfunctions, and the accuracy of data being tracked by the designs. Some drivers may not be comfortable having a telematics device installed in their vehicle tracking their location and driving behaviour then broadcasting it to the insurer.
According to Nielsen, 90% of new cars will have on-board telematics technology by 2020. It is also an opportunity to work with telecom providers to provide additional services, such as geo-location, vehicle diagnostics, roadside assistance and parental controls for young drivers. This can help insurers set more accurate and cost-efficient policy prices.