In the world of insurance, it's all about assessing risks. Risk assessments are the catalyst by which insurance companies can accurately forecast the future of their businesses, as well as how they assess the amount they should charge each subscriber for their policy coverage. Over time, the manner in which these risks are calculated has changed, with new technology like telematics being adapted.
It's a Process
The first thing to understand about telematics is that it's not just one thing, but instead, a process that involves several steps that range from collecting data to processing this data based on the consumer's actions.
The overall assessment of this information is what you could call the telematics. It's also important to understand that it is a process typically performed by a third-party agency, not the actual insurance company. The data is later passed to the insurance company.
Generation is the Beginning
At the foundation of a telematics process is the generation, or collection, of information. If you were to use an auto insurance policy as the model, this data collection would likely occur in the form of a sensor that is placed inside the vehicle.
The purpose of this sensor would be to collect information about the driving habits of the user, such as the number of miles they drive in a day or their average speed. This information is then transmitted back to the insurance company through a wireless connection.
Data is Analyzed
After the data is collected, the third-party agency will provide the insurance company with the data that has been collected. The goal of the insurance company at this point is to analyze this data. During this period, the insurance company will compare the driver submitted information, such as age and garage location to their collected driving habits.
As part of this assessment, the insurance company determines at which premium level the driver will be extended an insurance policy, or even whether or not coverage will be extended at all.
A critical part of the telematics process is the driver feedback component. Particularly when it comes to an existing policy, some insurance companies will also provide the driver with the information collected.
In this instance, the goal is to show the driver the data that has been collected, and if they are driving habits present that impact their premium, negatively, the driver can keep the data collection transmitter on their vehicle and improve their driving habits in an effort to correct the problem and lower their insurance premium.
Insurance telematics is a very versed concept, which varies depending on the specific insurance type, as well as the insurance company that plans to use the information, so keep this in mind.