Personal lines underwriting and revenues could be revolutionized with the use of monitoring units in drivers' automobiles, a technology executive said.
John Reynolds, vice president of new business for Waterloo, Ontario, Canada-based Intelligent Mechatronic Systems Inc. (IMS), said insurers who develop “Pay As You Drive Insurance” programs could place devices in cars to monitor the driver and use the information to formulate the policyholder's rates.
The concept has been around since the 1930s, Mr. Reynolds pointed out, but technology now makes it possible to accurately measure driving habits, giving people who really do drive very little a much lower rate than the average driver.
Use of global positioning systems (GPS) allows for the collection of mileage, braking and speed to give a picture of an individual's driving habits, said Mr. Reynolds. The hardware involved consists of a box installed in the car and an antenna placed on the dashboard, which allows for the collection of data.
IMS, which has been in business since 1999, designs and produces safety equipment for automobiles, ranging from seat belt reminders to audio readers used in cars to read BlackBerry messages.
“We've been in the business of producing solutions to real problems out there,” said Mr. Reynolds.
This is not simply novel technology for IMS. Mr. Reynolds explained that it has been working with insurers to develop the monitoring system. It has worked with Winterthur Group in Germany, a unit of Credit Suisse, in developing a program there.
In the United Kingdom, Norwich Union, a subsidiary of Aviva Company, already offers the program, calculating monthly insurance premiums based on a policyholder's driving patterns, he said.
According to its Web site, the Norwich Union program also offers other benefits such as round-the-clock personal assistance by an in-car assistance button, satellite navigation and speed camera detection.
Mr. Reynolds noted that the technology would allow insurers to offer many services that can not only expand revenues, but also bond the consumer closer to the product. Consumers, using all the features offered through the program, would be more reluctant to go through the hassle of having the box pulled out and losing all the products offered, he said.
For insurers, he continued, the program can attract the better risks, lowering their risk exposures.
In the United States, it would be up to the consumer to decide if he or she wants to be in the program after first monitoring their own reports. Mr. Reynolds said it is important for consumers to know that the information and analysis goes to them first, and they decide if it is passed on to the insurer.
He noted that in the United States, the company already sells GPS devices through Target retail stores that parents can use to monitor their children's driving habits.
There are several U.S. insurers, he said, who have trial GPS monitoring programs, but he declined to name them.
Mr. Reynolds identified Progressive as an insurer that has a black box system that monitors a policyholder's driving habits, and good drivers receive a discount under the program.
On Tuesday, IMS will hold a Web seminar on this technology and the “Pay As You Drive” concept.
Registration for the seminar is available at www.ipaidinsurance.com.
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