How Technology Can Help Fix One of the Insurance Industry’s Biggest Problems

May 4, 2018
Holger G. Weiss
Insurance companies and drivers have a problem: distracted driving. It’s causing the number of accidents to rise and insurance premiums to increase. Fixing the problem requires a radical rethink of our priorities.

Here at German Autolabs, we’ve talked a lot about distracted driving and how dangerous it is. In fact, it’s the problem that drives almost everything we do: we want to give drivers safer ways to stay connected, thereby limiting road deaths.

But in the meantime, the issue is growing more and more serious. As we noted recently, tightening legislation isn’t working. Despite comprehensive bans on mobile phone use at the wheel, phone use while driving has recently increased dramatically across the US, even in 14 US states that have put into place handheld phone bans.

We think the solution is better technology that enables drivers to stay connected without compromising safety.

But the problem of distracted driving also has another negative effect beyond accidents: it’s causing insurance premiums to rise dramatically.

Distracted Driving Increases Insurance Costs

Car insurers have two main concerns - fraud and claims. With more accidents happening as a result of phone use at the wheel and therefore more claims being made, insurance companies are understandably looking for ways to offset this problem. This has consequences for drivers.

More accidents means that insurance companies have to raise premiums on drivers to cover the increase in claims. Drivers hate this, but so do insurers. In Massachusetts, insurers increased auto premiums 3% to 6% on drivers in 2017 - on top of increases of 6% to 9% the previous year.

As Bill Caldwell, Executive Vice President of Horace Mann Insurance told the Wall Street Journal recently, “Distracted driving was always there, but it just intensified as more applications for the smartphones became available.” Horance Mann hiked auto insurance premiums an average of 8% last year on top of a 6.5% the year before. A considerable hole in the pocket for drivers.

Although it might look like insurers want to raise premiums to increase profits, these raises in fact represent the increased payouts they’re making as a result of accidents caused by distracted driving.

But what if there was a way to determine who was more or less likely to drive while using their phone without penalizing large demographic sections of the population who already pay higher premiums, such as younger drivers? This would lower costs across the board, keeping insurers and (safe) drivers happy - while providing another incentive against distracted driving.

Using Technology to Lower Risk and Keep Premiums Down

We developed Chris - a digital assistant for drivers. Chris enables you to control apps and services on your smartphone with voice and basic gestures while you drive, meaning that you can stay connected with minimal distraction. Chris retrofits in to every car, and so can help insurers immediately. There will be no waiting around for drivers to buy a new car with the latest infotainment system - Chris can be fitted in any car right away.

If you’re a driver, you don’t want the price of your insurance raised by drivers who have accidents as a result of distracted driving. By using Chris, you are identifying yourself to insurance companies as someone who is less likely to have an accident. Both parties win.

Less distraction mean fewer accidents mean fewer payouts, and this means cheaper premiums and higher returns.  

Insurers will work with us to enable more and more drivers to benfit from latest technology, and therefore less likely to have an accident. They could then offer cheaper insurance packages to these drivers. Fleet operators today have the same issue - many of their drivers are using phones for coordinating their routes or just staying connected. Imagine the impact on costs if professional drivers cause less accidents.

We’re still in the early days of developing our intelligent (AI powered) solutions, but we’re confident that, by using advanced technology, we can help both insurance companies and consumers, lowering premiums and moving towards a solution to the problem of distracted driving. And making driving smarter and safer for everyone.

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