Telematics and Auto Insurance Pricing

Telematics is the name of the process of pricing car insurance on a pay-as-you-go basis. Probably the most prolific marketing advertisements that are seen by the average consumer in the USA are that from Progressive Insurance. They are one of the first adopters of this newer technology. Therefore, whether you are ready for this new technology or not it is here to stay. Almost all carriers are developing a strategy for their car insurance portfolio in pricing their policies with telematics as some future component within the pricing structure. What telematics does is more accurately price an individual insured concerning their auto insurance.

Although the mantra in auto insurance pricing has always been to seek out the best and safest drivers on the road, that strategy is changing. Most carriers do not mind ensuring higher risk drivers; the problem is making sure they have priced their auto insurance products correctly so that they can still make profits.

Telematics is an evolving technology that will allow the auto insurance carriers to find safe drivers within higher risk groups of people. Typically, younger drivers are considered higher risk. By being able to come up with telematics technology that finds the safer teenage driver amongst the group, the auto insurance carrier will competitively price their products for this type of driver.

While this technology is initially been targeted at the personal private auto insurance market, it will soon be moving into the commercial auto insurance sector. You as a small business owner, it is prudent to be aware of the change that is coming down the road.

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