Telematics in the Insurance Industry: A Growing Trend

Kevin Jones
Technical Analyst
MSC

Auto insurance rates are calculated using information that helps determine a driver's risk. These risk factors have been based on--but not limited to--age, driving records, past claims, type of vehicle, and so on. However, it is anticipated that this method of determining risk is going to decrease as insurance companies invest in telematics systems, which will provide information on how an individual car is performing on the roadway. In ABI Research's press release on February 10, 2012, ABI Research estimated that global telematics use will rise from 1.85 million in 2010 to 89 million by 2017.

ABI Research reports that these systems have been in existence since 2002, but recently there has been renewed interest in them. The current telematics systems, or usage-based insurance (UBI) systems, are installed using the vehicle's on-board diagnostic (OBD) port. However, ABI predicts that installation of these systems will increase by way of factory or aftermarket wireless connections to the OBD bus via Bluetooth.