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Is Usage- Based Insurance The Future?

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Is Usage- Based Insurance The Future?

The insurance industry is embracing the technology supporting Usage Based Insurance. It is only a matter of time before many other industries jump on the usage-based bandwagon.

UBI provides insurance companies with detailed information about driving habits while offering a means to a lower premium payment.

The Technology behind Usage-Based Insurance

UBI is not an on again/off again insurance, but rather specifically tailored insurance coverage. Usage-based insurance coverage is now common.

According to the National Association of Insurance Commissioners, assessing certain things about driving habits helps determine the proper premium payment. The variables include: The miles driven, the location, rapid acceleration, hard breaking and hard cornering.

Concisely, the concept behind UBI telemetric information is, the worse (more dangerous) the driving, the higher the premium. (UBI) uses telematics to record how the driver behaves. Telematics are easily installed gadgets that track and report the number of miles driven and the driving behavior of the driver.

The idea is to encourage good driving by giving those who agree to constant monitoring a reduced premium rate. Better driving habits result in reduced insurance claims, and thus, higher profits.

For the cautious, law abiding drivers, UBI done through tracking can result in lower insurance premiums. However, many find this method quite intrusive, and there may well be litigation in the future regarding privacy concerns and UBI tracking.

The Growth of UBI

Insurance Journal reports that insurance providers have been playing around with UBI technology for over 15 years, and that it will likely become a standard product. The future of UBI coverage may come in the form of more sophisticated devices capable of collecting and transmitting information that is even more detailed.

However, it is all a work in progress, with companies assessing just how much things such as mileage and driving times really help predict future losses. Each technological innovation requires analysis for determining the proper means of use. In the end, the information provided by the technology may be quite useful, but we must never lose sight of the possible cost.

posted by Xplico Insurance Company Limited XIC LTD
09 Apr 2014


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