Auto Insurance Taps into IoT for ROI

In a new report from BI Intelligence, it appears that auto insurers are leveraging the power of the IoT to monitor the safety of drivers and they are using that data to make decisions about rates and risk.

Some of the parameters could be changes in speed, how often people drive, and the time of day they drive. For insurance firms, the expectation is that this will lead to lower costs through a better ability to assess risk levels. For consumers, it could mean changes in premiums, dependant on how they drive.

The most commonly used method for monitoring is by via On Board Diagnostic devices that relay activity analytics to the insurance company. The devices are plugged into the port under the steering wheel. BI estimated that there are 155 million cars on the road in North America with compatible ports, and that number only increases as older cars are phased out.

The BI report looks at the current U.S. insurance market and evaluates how the insurers are using IoT devices to be more profitable. The report indicates that auto insurers are the leading adopters of usage-based insurance models, over other insurance verticals. By 2020, BI estimated, more than 50 million drivers in the U.S. will have tried UBI insurance. These insurers are offering lower premiums to drivers who opt in, and show safe driving habits because it helps them reduce risk and mitigate costs, according to the report.

In addition, because IoT-based analytics can be used to predict future events, like major weather patterns, the report indicated that insurers should be able to better price policies and prepare customers for upcoming incidents, which should help reduce damages.

The report is available for purchase from BI, but the broad strokes seem to indicate the the insurance industry is well-positioned for a big buy-in to IoT.

And that’s no act of God.