USAGE-BASED INSURANCE PROGRAMS Flashcards
SECT A: USAGE-BASED INSURANCE PROGRAMS
DEFINITION OF TELEMATICS
USE OF WIRELESS DEVICE TO TRANSMIT DATA TO REAL TIME BACK TO AN ORG
DATA USED IN INS TO DEVELOP MORE ACCURATE PRICING, RISK MGT TECHNIQUES & CLAIMS ASSESSMENTS (WHICH REDUCE LOSSES)
SECT A: USAGE-BASED INSURANCE PROGRAMS
IMPACT ON CONSUMERS (4+/4-)
(+) incentivized to adopt risk-minimizing behaviours for lower premiums
(+) enhanced safety, appealing to parents of young drivers
(+) premium discounts for participation (from insurer), for driving performance (from insurer) or from voluntary reduction in miles
(+) transparent & direct link between driving behaviour/usage & policy pricing
(-) privacy concerns over data
(-) blackbox to consumer; doesn’t know how improved behaviour is quantified in discount; what constitutes good behaviour?
• Failure to achieve meaningful loss mitigation
• Disclose to consumer via UBI participation agreement, identifying each measured driving factor & why
(-) use of data in claim settlements only when helpful to insurer
(-) penalizing consumers not because of driving but because of where/when they drive as a function of work & housing segregation
SECT A: USAGE-BASED INSURANCE PROGRAMS
IMPACT ON INSURERS (4+/2-)
(+) better risk pricing/segmentation for competitive advantage
(+) mitigating adverse selection for competitive advantage
(+) reduce claim costs with seamless data transmittal
• Real-time data
• More accurate estimates of damages
(+) improve brand recognition & loyalty
(-) cost of technology & hardware with indirect cost of installation, maintenance & logistics
(-) lack of standardized devices & data
SECT A: USAGE-BASED INSURANCE PROGRAMS
IMPACT ON REGULATORS (1+/4-)
(+) actuarially sound rates that are not excessive, inadequate or unfairly discriminatory
• Rating plans with rating factors relating to education, occupation & credit scores still discriminating
(-) ensure all discounts are made available to those who meet criteria
• Provide regulators with information about data collection, use, ownership, storage, protection & dissemination
(-) insurers may object to filing proprietary models because they are trade secrets
(-) public disclosure & transparency
(-) limited regulatory oversight to date
