Data For Premium Discounts

Would you allow insurance companies to track/monitor/gather data on your lifestyle in return for cheaper premiums?

There are devices installed in the vehicles by insurers  that provides such incentives for a better understanding of their drivers.

BLACKBOX IN THE CAR

An article from Forbes reporting on telematics devices that behave "like an airplane’s black box, the gadget gathers second-by-second data about the car’s operation and allows an insurance company to offer lower prices for safe drivers."
Source:- www.forbes.com

The safer you drive, the more discounts you receive. Vice versa for the poor drivers [who opted for the devices] to be penalized in the near future for bad driving as Forbes reported that "So far insurers have not wanted to alienate early adopters with penalties, but they will soon have to in order to subsidize the equipment, service and discounts for the safer drivers"

Source:- www.forbes.com

VIEWS

it has always been a one way street for insurers to place conditions,warranties and clause on policies to minimize the insurer's risk exposure. By engaging the insured's interest in working together to minimize risks exposure [with incentives of course] and becomes beneficial for both parties in the long run [manageable claims ratios and cheaper premiums]

From a risk perspective, imagine the potential if similar monitoring devices are introduced on other classes and monitored by insurers. Currently pricing of premiums are based mainly on previous datas and forecasts of risk levels rather than encouraging insured/customers to work towards lowering risk levels with cheaper premiums rate in return.

Examples such as:-

1. GPS tracking & various sensors for marine cargo & Marine Hull insurance [Known high risks insurance portfolios].

2. Sensors and detectors of water pressures and linked to insurer's system for high risks fire insurance.

I see the potential in this concept towards managing claims ratios for other insurance classes in the event of a market deregulation with price slashes and risks not properly quantified. Key factors towards good risks management are good monitoring, good controls and good understanding of risks identified.