(Bloomberg) — Insurance companies around the world are promising lower rates on car coverage. The catch is they want to install the equivalent of an airplane's black box to track how and where you drive.
Smartphone applications and devices that record trip and vehicle data are set to infiltrate auto insurance at a rapid pace, bolstered by discounts of as much as 30%. Consultancy Oliver Wyman forecasts that car insurance using driver data to set prices will grow 40% a year to become a $3.6 billion market by 2020.
For insurers, it will provide fine-grained information on an individual's driving style, like flooring it to beat a red light, to improve returns in the competitive segment. For drivers, Big Brother-like monitoring offers the prospect of lower rates and faster response time in the event of an accident, including medical assistance and repairs. In any case, the shift away from standard practices of rating customers by age and driving history might be unavoidable.
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