Connect
To Top

The New Phase in Auto Insurance: Are We Going Usage-Based?

With innovation being at the realm of technological advancements, auto insurance companies have been experimenting with new tech releases to improve their services.

In fact, they are currently experimenting on assessing drivers based on how they drive rather than the proverbial statistics used such as age, location, and driving history.

Rather than filling out all the details before giving your driver’s license, you will now be tested by the insurance company based on how you drive a little, before they can determine a suitable quote for you. This is a fresh outlook from the previous method of generating a quote based on your driving history.

Usage-based insurance is becoming increasingly popular to determine an individual’s insurance premium

The Growth of Usage-Based Insurance

This kind of technology is known as usage-based insurance. At the forefront of this new technology are the likes of Root Insurance, which managed to raise over $100 million in funding, bringing Root’s worth near to the $1 billion valuation.

As of now, Root Insurance operates in 20 States in America, and by 2019, is looking to expand to all 50 states.

Additionally, new companies joining the auto insurance spectrum have also begun utilizing usage-based insurance, thanks to the easy access and affordability of smartphones.

In fact, companies such as Progressive Insurance, have begun offering their customers discounts based on how they drive through its ‘Snapshot’ program.

Business leader at Progressive, James Haas, stated that their company utilizes an app that looks at the driving and provides rewards and discounts that determine your safe driving.

As from an email written by Haas, he believes that when it benefits the consumer, it encourages safer driving, and provides individuals with the opportunity to get discounts for a culture of safer driving.

The use of apps is playing a monumental role in studying an individual as they drive and determining the suitable premium for them

Taking Driving to a Technological Level

That being said, such a structure aims at gamifying the concepts of driving, so that discounts are earned over a period of time to encourage drivers to maintain the app on their phones, which requires them to have their tracking location kept on.

Moreover, according to Progressive, the information collected is then used to determine the insurance quote that the driver pays on a monthly basis.

Additionally, users of the Progressive app will also receive a first-time discount, as well as a personalized insurance premium later that will be generated based on how they drive.

Like Progressive, Root has also taken an identical approach.  Once you have their app downloaded to your smartphone, you can enable the tracking location device, make an upload of the photo that is in your driver’s license, and you’re good to go.

Some of the perks of the Roots app is that you don’t have to open the app while you’re driving, sign in, or log in trips during the process.

In fact, the app will run in the background, collecting information regarding all facets of your driving skills.

Insurance premiums used to be judged based on traditional history. However, they can be inconsistent and biased at times

Progressive vs Roots

Nevertheless, it differs from the Progressive app in the sense that it is financially stricter. It does not provide discounts based on a user’s driver history over time, or enable the user to get new renewals on their insurance quotes.

In fact, after you have completed two weeks with the app, it will generate your auto insurance premium, and the app is no longer necessary for the user.

However, there’s a catch to all this. For you to successfully build a profile with the app, you need to have the app consistently sitting in the background monitoring you.

According to chief technology officer at Root Insurance, Mr. Dan Manges, it is necessary for the app to continuously monitor the driver to build a great profile.

The Tracking Device Affair

In fact, the company mentions that it tries as hard as possible to be transparent with its clients with the app monitoring you throughout the period, without it being switched off during the two-week trial.

That being said, users can manually switch off the tracking features once the trial period is over. Nevertheless, the app will still continue to collect information which Manges says will only be used to improve their algorithm rather than change the ratings of an individual’s premiums.

Conclusively, traditional auto insurance has been around for decades, but it seems the ingenuity of technology could be replacing it pretty soon.

More inCar Insurance