Bensman Risk Management, Inc.


Insurable Interests

Bensman Risk Management, Inc.
2333 Waukegan Road Suite 275
Bannockburn, IL 60015
847-572-0800 Phone
847-572-0502 Fax

Insurable Interests may offer general financial, insurance, tax and business ideas. However, due to the ever-changing tax laws as well as the complexity of the financial industry, you should seek professional advice before implementing any of the ideas contained in this newsletter. The Bensman Group, Bensman Associates Ltd., Bensman Risk Management, Inc. or Schemata, L.L.C. assumes no liability whatsoever in connection with the use of this newsletter.

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Securities offered through Kestra Investment Services, LLC (Kestra IS), Member FINRA/SIPC. Investment Advisory Services offered through Kestra Advisory Services, LLC (Kestra AS). Kestra IS and Kestra AS are not affiliated with The Bensman Group, Bensman Associates Ltd., Bensman Risk Management, Inc. or Schemata, L.L.C.

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Insurable Interests

Vol. 8, Issue 9May 2013

MONTHLY MESSAGE

Is Telematics the Future of Car Insurance?

You probably have seen the ads for car insurance companies that offer premium discounts if you allow the company to put a small computer on your car that collects data about your driving habits: how fast you drive, how far you drive, how often you brake, how fast you accelerate, etc. The theory is that this technology, called telematics, can identify safer drivers and therefore reduce claims enough to allow the insurers to offer discounts that are attractive enough to lure lots of new customers.

So far telematics is limited mostly to companies whose clients are buying primarily based on price and who are already very comfortable with technology and buying online. If it works, though, it could have a significant impact on the auto insurance market. Insurers that use telematics would have driver-specific information that would allow them to reward good drivers and either charge significantly higher premiums to bad drivers or refuse to insure them at all. Good drivers would migrate to those insurers, leaving other insurers in a position of having to use telematics themselves or be stuck with those drivers whose driving would not stand up to such close inspection.

Of course, the use of telematics is not yet widespread enough to determine whether it is going to provide meaningful benefits to insurers, in terms of either reducing claims or attracting customers. In addition, there are other issues that still have to be resolved, including:

  • Privacy concerns. There is a question as to whether a significant number of drivers want their insurance carrier tracking their driving to such a degree. Some drivers might have practical concerns: Perhaps they regularly speed or drive recklessly, or perhaps they significantly under-reported how much they drive. Other drivers might just be uncomfortable with the “Big Brother” aspect of this kind of data collection.

  • Potential legal considerations. For example, if a driver is in an accident, can the attorney for the other party demand access to the information in order to prove fault? Going even further, can information such as where a person drove and at what time be used against the driver in civil actions such as divorce, or even in criminal action?

  • Use with young drivers. Some parents support the idea of using on-board computers to track the driving habits of their newly licensed drivers, not only because it might provide a discount, but also because it allows parents to see if their children are exhibiting risky driving behavior. But other parents suggest that this kind of use undermines the trust between parent and child.

  • Regulatory issues. Particularly if telematics data reveal significant differences based on issues like age, location, gender or ethnicity, regulators may feel forced to step in to ensure that everyone has access to insurance, much like they did to stop insurance redlining -- refusing to write coverage in low-income areas.
It remains to be seen how much affect, if any, this new technology will have on the auto insurance industry. At The Bensman Group, we will continue to monitor telematics so that we can provide the best information possible to our clients. If you have questions about telematics, or about any other insurance issue, please contact us at 847-572-0820 or dmiller@bensman.com.

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