How IoT is reducing insurance premiums for smart drivers

The Internet of Things is only a few short steps away from being able to lower insurance premiums, says Roger Haenni, chief executive and co-founder of Datum

Insurance. It’s something that you’d prefer to have and not need, rather than suddenly need but don’t have. Which is why in most industries and sectors, insurance is a pre-requisite before you can do certain activities. It gives you protection and coverage from sudden eventualities.

Take the case of driving a motor vehicle, for example. According to statistics, 1.25 million people die from automotive accidents annually. Also consider the cost of reparation, car repairs, injuries and other damage to property that occur due to accidents.

While insurance definitely won’t replace lives nor the valuable time that motorists spend on repair or restoration, it is still considered a minimum framework for helping address the risks of the road.

However, computing the cost of insurance premiums might be something that the average user does not comprehend, which leads to the idea that our premiums are too expensive.

One thing is for sure, short of becoming an insurance broker yourself, there are certain things you can do to reduce your insurance premiums. These all relate to reducing your risk as a driver and ensuring the insurance company has all the data it needs regarding your driving habits, as well as any information about an accident, which can make their job easier.

1. Install a blackbox or “dashcam”

Perhaps the most basic and straightforward way you can decrease insurance costs is by installing video-recording equipment on your dashboard. So-called automotive blackboxes or dashcams, these devices keep a record of all activity that happens in front of your vehicle, which can help determine who is at fault whenever there is an accident.

Not all dashcams are equal, however. The higher-end ones have better optics and usually have dual recording capability. This means they can also keep track of what happens both at the front and inside the vehicle or its rear, which can be helpful in assessing the situation in case any incident arises. Some dashcams also start recording when motion is detected even when a vehicle is parked. This helps keep track of goings-on during a theft.

Most insurance companies already offer outright discounts when a dashcam is present in the vehicle. These discounts usually range from 10 to 15%. Video evidence that proves you are fault-free can also help reduce claims and subsequently increases in your insurance premium.

2. Share your data

Here at Datum, we have been advocating data-sharing, given the sheer number of benefits that you can get when you participate in a truly decentralized marketplace for data. One such benefit is – you guessed it – lower insurance premium payments.

Telematics-based insurance, also known as pay-as-you-go insurance made inroads into the US market a few years back, and these helped customers pay for coverage on a per-use basis. This means the more you drive, the higher your insurance premiums would be.

Let’s go beyond such telematics, however. With more data points, insurance providers can have a better picture of what kind of driver you are. This driver’s profile can help reduce your premiums, but mostly if you are a smart driver.

For the most part, insurance companies keep track of how far you drive and how often, which is one way they gauge depreciation of your vehicle. Other factors include age, sex, marital status, places you live, work, and drive in, and your credit history, among others.

You can easily plug in devices onto your car’s computer via the OBDII port, which send back data to your insurance provider. However, such systems are considered to be insecure. Perhaps a way to improve this is by ensuring strong encryption and taking out potential vulnerabilities that malicious hackers can use in attempting to steal your data.

Is blockchain the answer? With our level of encryption and the fact that an immutable blockchain will not let intruders impact smart contracts and transactions, I can confidently say that our data marketplace is the best place to store, manage, and share this kind of data.

What else can you do?

Experts and even insurance companies give a few other suggestions on how to reduce insurance premiums. For instance, simply having a good credit rating can get you lower premiums. So, can enrolling in a defensive-driving course.

I cited the above examples first – dashcams and data – because they are decidedly related to IoT. Even as most blackboxes and OBD scanners are currently offline devices, we’re soon getting to a point wherein these can be easily networked and connected. The point is once we have all that data, it will be easier for insurance companies to optimize premium payments and claims computations, not to mention the other benefits that a data marketplace can offer.