Telematics and big data analysis have helped to determine that the safest drivers have a lifetime value of 3x compared to other drivers to insurers, and that the worst 10% of drivers are not profitable to insurers.
(Credit: Robert Kneschke)
The purpose of vehicle telematics is very clear. It will reduce, or possibly eliminate, the reliance on arcane rating tools, such as gender, age, marital status, education or even credit score. It also allows for real-time intervention to help avoid future claims and provides transparency to the consumer about why they are being charged the rates they are based on their driving behavior.
One of the common complaints from consumers about their experience with Root, an InsurTech that is growing rapidly in the auto insurance space, is that they did not receive an insurance quote. As Alex Timm, CEO of Root, is often quoted: "In the case of the 10%-15% highest risk drivers, we underwrite out these customers without considering any other variables." If you have downloaded the Root telematics app, allowed it to monitor you for three weeks, and at the end of it, do not receive a quote, then you know exactly what type of driver you are.
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