The global insurance industry needs a solution to provide more transparency in service, accuracy in calculating insurance costs and customizing unique services for insurers. Nowadays, insurance companies, in the eyes of customers, are considered as a combination of financial turmoil and uncertain services. Because many factors, dependently and independently, can affect insurance services. For this reason, customers need certain services to guarantee their safety and more peace of mind must be provided to them.
Usage-based Insurance will change the insurance industry
The UBI (usage-based Insurance) provides a fundamental solution for addressing insurer’s concerns as well as those of the insurance companies. The usage-based Insurance (UBI) also known as Pay How You Drive (PHYD), Mile-based Auto Insurance and Pay As You Drive (PAYD) insurance, is considered as a customized and usage-based insurance. This solution calculates your insurance costs based on the driver’s behavior, the type of car, the distance, time and place. Therefore, the insurance costs fairly depending on the customer’s driving behavior and other related factor specified to customer’s situation, neither unpredictable nor nondependent factors affect the insurance cost of customers.
GPS changed the future of the insurance industry
It may seem that UBI, asset tracking or M2M (Machine-to-Machine) systems are innovations, but these platforms work based on the fundamental concept of GPS. The GPS or Global Positioning System was invented by the U.S. Department of Defense in 1970, when the tension between the former Soviet Union and the United States was at the highest level. Due to the concerns about the potential nuclear attack from the former Soviet Union, the United States designed a platform for the US military to target long-range weapons such as a cruise or nuclear missile much more precisely. And also, it allowed the US military to target artillery effectively and with high precision. After providing this unique invention to the public applications, the world encountered with abundant innovations based on the GPS. These innovations provided more convenience and peace of mind for people all around the world and facilitated the controlling and management processes from remote places and decreased the implementation costs as well as improving accuracy and emergency responses.
Evolution of insurance
By the early twentieth century, telematics technology was used in the fleet management system and provided a kind of asset tracking platform but it was very slow and had low-levels of data transmissions. The next evolution observed in the M2M systems and enterprises benefited from the Internet of Things (IoT). This solution accelerated tracking processes and improved real-time reporting and accessibility to the necessary data. Advancements in the GPS, Telematics technology and IoT based M2M systems caused the advent of UBI. The first launch of PAYD Insurance occurred in 2007, and 2010; companies like Qualcomm and Renault introduced a similar system, namely UBI or Usage-based Insurance. Currently, UBI market penetration is less than one percent and is expected to achieve 15% in Europe, Asia and America market by 2020.
Benefits of UBI
The UBI solution provides more choices for customers and put the control in their hands. This platform reduces the insurance costs, improves the understanding of risk for customers, provides a dynamic method of insurance’s cost calculation and also maximize the controlling and management process. The accurate gathered information based on different factors enables insurers and insurance companies to precisely conduct cost calculations and even have better decision-making.
Improving the UBI solution and making it smarter
The UBI equipped by ADL embedded solutions accelerates M2M systems and this feature also improves the accessibility to the wide range of data about driver behavior, distance, location and general information about the vehicle. Also, UBI provides sufficient and valuable information about road’s condition, driver’s behavior and quality of products to the telematics service providers (TSPs) and original equipment manufacturers (OEMs) for enhancing driver’s safety, emergency road assistantship and other crucial car’s services. The cloud and connectivity service of UBI enables insurance companies to store, recover and analyze data related to the drivers and their vehicles’ condition. These features, in the long-term, encourage drivers to improve their driving behaviors and will decrease the rate of accidents. Also, it is considered as a sustainable solution because it will reduce the traffic congestion by reducing the amount of unnecessarily trips and consequently, will reduce the amount of greenhouse gases, nitrogen oxides, carbon monoxide, and other pollutions that emit from vehicles and are very harmful to the environment.
Smart city and the UBI solution
Based on the definition of SMA’s research report of smart cities, a smart city is one that is proactively leveraging connected world technologies to gather, analyze, and act upon real-time data to improve the lives of citizens; enhance mobility; create safer environments; optimize energy consumption and waste management; and contribute to the urban center of the future. Based on this report, the world’s population continues to migrate to cities and this evolution increases all forms of risk for both individuals and businesses. The smart technologies that are employed in cities have the potential to reduce such risks for vehicles and individual’s property.
Benefits of UBI for smart cities
The UBI is one of the smart solutions that employs modern technologies and can reduce the danger and risks of damage to people’s properties. The UBI IoT based solution can collect real-time information and effectively monitor the status of the vehicle and thus provide emergency assistance for drivers. Therefore, the UBI generates abundant benefits for cities, and it will inevitably become a vital part of smart cities.