NAIC Telematics

Question 1

Usage-based insurance (UBI) definition

Answer 1

auto insurance based on:
* how far a vehicle is driven
* where it’s driven
* how it’s driven

Question 2

Info regarding how you drive

Answer 2

• speeding, rapid acceleration
• hard-braking
• swerving
• cell phone use

Question 3

Benefits of UBI to consumer

Answer 3

Availability
* may increase because insurers can price risk more accurately
* accurate pricing means insurer is better able to manage risk
* insurer may then accept more risk and write more policies

Affordability:
* UBI is better at identifying good drivers
* good drivers will have lower rates under telematics

Consumer control:
* telematics can provide real-time feedback on driving habits
* all drivers can improve driving habits and get lower rates

Question 4

Benefits of UBI to insurer

Answer 4

Accurate pricing:
* allows better risk management > lower losses > financial strength
* can identify & retain low-risk drivers
* can identify high-risk drivers and price accordingly or provide feedback so high-risk drivers can improve driving habits

Faster claims settlement:
* accident info is immediately available through telematics

Question 5

Benefits of UBI to society

Answer 5

Less discriminatory rating:
* rates are based on how you drive (instead of age, sex, marital status, home ownership)

Encourages less driving:
* rates are directly related to how far you drive (leads to fewer accidents, less congestion, less pollution, lower infrastructure costs)

Question 6

Concerns related to UBI

D-TOPIC

Answer 6

Data credibility & manipulation
* will data be credible, especially at early stages of adoption
* digital devices are subject to manipulation by hacking

Transparency
* will consumers understand how their data is used (device is a black box)

Oversight
* is there sufficient regulatory oversight for UBI (device is a black box)

Privacy
* will personal data that’s collected be secure (used only for loss mitigation/pricing, not sold to 3rd parties)

Income level
* lower-income drivers may be disproportionately affected by cost of device

Cost
* cost of device may be significant for middle-income drivers also