Published October 31, 2024 | Version v1
Journal article Open

Leveraging Telematics and IoT for Usage-Based Insurance Models

Authors/Creators

Description

Telematics and the Internet of Things (IoT) are transforming the insurance industry by enabling innovative usage-based insurance (UBI) models. These models use real-time data from connected devices to assess risk more accurately, resulting in personalized premiums and enhanced customer engagement. This paper explores the technological advancements, data analytics techniques, and business implications of telematics and IoT within the insurance sector, with a focus on UBI. It reviews existing literature on telematics-enabled insurance, examines case studies from early adopters, and highlights challenges such as data privacy, regulatory issues, and technology integration. The study suggests that telematics and IoT hold the potential to redefine risk assessment and customer interaction in insurance, making the UBI model an indispensable part of the future of insurance. By examining data streams from sensors, vehicles, and mobile devices, the paper provides insights into how insurers can leverage these technologies to offer dynamic pricing models, optimize claims processing, and improve overall customer satisfaction.

Files

EJAET-11-10-1-6.pdf

Files (297.3 kB)

Name Size Download all
md5:7434f1bdc62b3544985b737903ae03a0
297.3 kB Preview Download

Additional details

References

  • [1]. M. Ayuso, S. Guillén, and A. Alcañiz, "The impact of telematics on insurance pricing: Evidence from a natural experiment," Journal of Risk and Insurance, vol. 87, no. 2, pp. 390-421, 2020. DOI: 10.1111/jori.12273
  • [2]. Siniša Husnjak, Dragan Peraković, Ivan Forenbacher and Marijan Mumdziev "Telematics System in Usage Based Motor Insurance" Journal of ScienceDirect, vol 100, 2015, pp. 816-825, Available: https://doi.org/10.1016/j.proeng.2015.01.436
  • [3]. National Assoiciation of Insurance Comissioners, Usage Based Insurance and Telematics, 2014. https://content.naic.org/node/1515
  • [4]. National Assoiciation of Insurance Comissioners, Usage Based Insurance and Telematics, 2017. https://content.naic.org/article/consumer-insight-understanding-usage-based-insurance
  • [5]. T. Ippisch, "Telematics Data in Motor Insurance: Creating Value by Understanding the Impact of Accidents on Vehicle Use", Doctoral dissertation, University of St. Gallen, Graduate School of Business Administration, Economics, Law, and Social Sciences (HSG), 2010.
  • [6]. A. Laurie, Telematics – The New Auto Insurance, Towers Watson, St. Louis, USA, 2011.
  • [7]. J.-P. Boucher, S. Côté, M. Guillen "Exposure as duration and distance in telematics motor insurance using generalized additive models", Risks, 5 (4) (2017), p. 54, https://doi.org/10.3390/risks5040054
  • [8]. K. Fitzpatrick and L. C. Magnani, "Telematics and the transformation of auto insurance," Insurance and Technology Review, vol. 5, no. 1, pp. 102-117, 2021.
  • [9]. J. Barry, "Usage-Based Insurance and the connected car revolution," Journal of Technology in Insurance, vol. 15, no. 4, pp. 45-52, 2021.
  • [10]. Ayuso, M., Guillen, M. & Nielsen, J.P. Improving automobile insurance ratemaking using telematics: incorporating mileage and driver behaviour data. Transportation 46, 735–752 (2019). https://doi.org/10.1007/s11116-018-9890-7
  • [11]. K. Verhoef, "Telematics in Europe: Regulation and adoption trends," European Insurance Review, vol. 22, no. 3, pp. 71-82, 2022.
  • [12]. A. Ziakopoulos, V. Petraki, A. Kontaxi, G. Yannis, "The transformation of the insurance industry and road safety by driver safety behaviour telematics", Case Stud. Transport Pol, 10 (4) (2022), pp. 2271-2279, https://doi.org/10.1016/j.cstp.2022.10.011
  • [13]. S. Moosavi, R. Ramnath, "Context-aware driver risk prediction with telematics data" Accid. Anal. Prev., 192 (2023), Article 107269, https://doi.org/10.1016/j.aap.2023.107269
  • [14]. H.J. Li, X.G. Luo, Z.L. Zhang, W. Jiang, S.W. Huang, "Driving risk prevention in usage-based insurance services based on interpretable machine learning and telematics data" Decis. Support Syst., 172 (2023), Article 113985, https://doi.org/10.1016/j.dss.2023.113985
  • [15]. J. Cheng, F.Y. Feng, X. Zeng, Pay-as-you-drive insurance: modeling and implications, North Am. Actuar. J., 27 (2) (2023), pp. 303-321, https://doi.org/10.1080/10920277.2022.2077220