The car insurance industry has seen some drastic changes thanks to new technological innovations. Read on to find out how these changes will affect you.
As technology continues to progress at a seemingly unstoppable rate, it has started to integrate itself into industries that have previously relied solely on large quantities of manpower. The insurance industry is one of these sectors, with car insurance specifically seeing great strides in ease of access, transparency and lower costs for its consumers due to new tech. Over the past few years, several notable technological advances have significantly changed the motor insurance space, starting with online shopping and comparison sites to telematics driving, innovative insuretech companies to investigating the potential of blockchain technology. Below, we discuss ways these technologies have disrupted the car insurance space—and how they will be able to save drivers money.
Internet of Things: Telematics Driving
Telematics driving insurance plans were rolled out in Singapore a few years ago as a way to track and reward drivers based on their mileage and driving habits. For example, car insurers such as MSIG or NTUC Income provide rewards by way of discounted premiums or excess waivers. Telematics-based car insurance plans work via an app that will be able to relay your driving habits back to your insurer, tracking behaviors such as speeding, hard braking and acceleration and mileage. Based on your driving score, you can end up with a discount of up to 35% when it comes time to renew your premium on top of your NCD.
This type of tracking can be an invaluable tool for insurance companies to track risk for underwriting purposes, leading to savings for consumers as premiums will be based on driving habits and scores rather than on general demographic information such as gender and age. Telematics tools have also made the driving experience less stressful for drivers. In addition to being rewarded with lower premiums, telematics technology has also made it easier for drivers to request roadside assistance and has given them a greater incentive to practice safer driving, leading to less accidents and reducing the risk of costly medical bills.
In a sense, safe drivers are paying extra in their insurance premiums to subsidise the claims being made due to dangerous or bad drivers. To solve this disconnect, insuretech companies have been rising as a part of a new sub-category of companies in the insurance space that aims to update the way car insurance operates and reduce the penalties safe drivers face. For example, one current company in Singapore, Vouch Insurance, has changed the way insurers pool and reward their drivers by forming a separate community of safe drivers who can earn up to a 15% premium rebate at the end of every year, assuming no one in the group has filed a claim. This kind of claim-free rebate is the first of its kind in Singapore and helps the 90% of drivers who have not made car insurance claims save hundreds of dollars.
While blockchain was previously connected solely with cryptocurrencies, this new technology has piqued the interest of auto insurers in the US and Singapore to push for the adoption of blockchain practices. A blockchain is essentially a decentralised ledger that is held on multiple servers and secured through cryptography. As a means of passing data from one party to another, it also serves to ensure validity and security by matching the data against all the other transcripts that it will have of the interaction which will be stored across all its servers. This type of record collection can prove to be useful to insurance companies and their consumers who have long suffered from a lack of data security, transparency and incomplete information.
Once Singaporean insurers adopt blockchain technologies, consumers may start seeing its benefits through lower premiums and faster claims processing. More accurate reporting information from repairers, automakers and individual driving histories means all data will be verifiable, readily available and easily accessible for more accurate underwriting. This could democratize insurance via peer-to-peer insurance and reduce premiums for most drivers, which would be a welcome respite in Singapore where car insurance is already very expensive. Additionally, you may be able to get your claims faster if your insurer utilises blockchain tech as all the information relating to your claim can be automatically uploaded to the blockchain whether from the car repairer or the third-party insurer, and release payments automatically when all the conditions for the claim are met.
This was first published at Value Penguin’s website, “How Will New Technology Like Blockchain Affect Your Car Insurance Premiums?“.