How does a connected car insurance policy work?

Connected car insurance relies on technology to better match insurance premiums to how safely drivers drive. Policyholders who participate in a connected car insurance program, sometimes known as usage-based insurance, agree to monitor their driving behaviour using in-car technology.

Some of the driving behaviours that an insurer could monitor through a connected car insurance program include:

• How fast someone drives, including whether they drive faster than others on the same road
• Whether drivers have a habit of accelerating and braking too hard or taking corners too harshly
• How many miles someone drives
• The times of day and night people tend to drive, including whether they drive during times when accidents occur more frequently
• Whether drivers use their mobile phone while driving

How is connected car data measured?

Today, many car insurance companies offer some type of connected car insurance program. Drivers who want to participate in such a program often agree to install a plug-in device in their car that monitors their habits and behaviours.

Other systems monitor driver behaviour by using a mobile app via the driver’s smartphone or relying on technology built into the car during the manufacturing process.

It is also possible that some drivers who participate in a connected car insurance program will have a device known as a “tag” installed on their window or rear window that is paired with their smartphone via Bluetooth.

Companies may also offer more than one of these tracking options, allowing drivers to choose the option that works best for them.

What are the benefits of offering connected car insurance policies?

With connected car insurance, an insured person’s driving is tracked for a period before the insurance company analyses it. Once you’ve finished evaluating this information, you can assign each driver a score.

Based on these driver scores, your company can set fairer insurance premiums. Instead of guessing if a driver is truly safe or if they’ve been lucky and avoided accidents, you can use data to make informed decisions.

Once you have an accurate gauge of the level of risk a driver poses, you can use that data to send them driving tips and suggestions for change that can make them safer. As their behaviours change, you can offer rewards for their new safe driving habits. Data from our “Now is the Time for Connected Driving” report showed that “rewards can not only deliver improvements in driver behaviour..but they can also help to retain customers, and they are cheaper than discounts.” By using connected car insurance policies, you’ve made the road safer and increased your company’s ability to retain that policy.