We've all seen the commercials for Progressive's Snapshot and State Farm's In-Drive.

In exchange for personalized data, insurance companies are nowoffering consumers lower premiums based on their actual habitsinstead of educated guesses derived from population statistics.

The use of these data-collection devices, called telematics, is part of the Internet of Things,and it is the future of insurance. In the near future, telematicswill change everything about how insurance companies evaluate riskand communicate with customers.

Risk and reward

Data is the lifeblood of the insurance industry.

Without good data, actuaries and underwriters can't chargeaccurate premiums for prospective insureds. Some of this data isrelatively straightforward, such as life expectancy factors anddriving risks, but all of it depends on people other than theactual insured. Telematics promises to consider the individual,rather than the group, to provide better premiums for morecustomers.

Telematics gives potential customers the opportunity todistinguish themselves from the crowd.

Homeowners, for example, know it can be dangerous to have awood-burning fireplace. Fires are risky — nomatter the cause — and to mitigate that risk, insurance companiescharge higher premiums to people who live in houses with thosefireplaces.

Telematics, however, depends on individual homeowners. If youlive in a city with a lot of cold weather, but you barely use yourfireplace, telematics can read that information and lower yourpremium. This way, you don't pay the same amount as yours'mores-loving neighbor.

For auto insurance, State Farm's In-Drive measures key variablessuch as miles driven, acceleration, braking, turns, high speeds andtime of day to reassess risks and reprice premiums every month. Italso gives parents and guardians access to their teens' drivingbehaviors so they can better protect their young drivers (who arenearly three times more likely to die in a car crashthan people 20 and older).

Now imagine that telematics extends several times beyond theircurrent capabilities, and you'll start to get a sense of how thesedevices and the Internet of Things will change the insurancelandscape.

Future of insurance

Telematics will transform insurance from a fixed-cost operationinto a variable-cost one.

Current technologies such as Snapshot and In-Drive providepersonal rates based on an individual's data, but they stillprovide static rates. As the technology improves, we will start tosee more variables affect insurance rates, potentially providingdifferent charges based on usage — similar to how power companiesoperate.

For auto insurance, we can measure driving habits and studytypical weather patterns, but the data collection is stillrelatively primitive. More-advanced technology and widespreadadoption will allow us to shift to a cost-per-mile model,incorporating real-time weather, congestion and time-of-day data togive a value to each mile and provide a truly accuraterisk assessment for every driver on every trip.

Telematics will change mechanical insurance as well.

Right now, the industry rewards insureds who practice goodmaintenance habits and follow commissioning standards, butcompanies don't know much about the equipment they insure until thecustomer reports maintenance.

Eventually, the ability to consistently report will give lowerpremiums to everyone automatically — and penalize those who don'tpractice good maintenance. This gives lower premiums than today'smodel, in which everyone pays higher prices because insurancecompanies can't track who's really taking care of theirequipment.

Similarly, home insurance companies are now working with Internet of Thing companies,such as Nest, to ensure security systems are working, contactfire departments when needed, and reduce insurance premiums allaround.

And some health insurers have already begun using wearable technologyand fitness incentives to help their customers pay less forinsurance. The insureds get fitter and pay less, while theinsurance companies get a healthier pool of customers and,therefore, reduce their total risk.

Both the people and their insurance companies save money, soeveryone wins.

What will insurance look like 10, 20 or even 50 years from now?It's hard to know exactly, but we do know that the more real-timedata individuals can provide to insurance companies, the morepersonalized, lower premiums they will receive.

Saar Yoskovitz is the CEO and co-founderof New York City-based tech company AugurySystems.