Hyundai is the latest automaker to let its buyers switch to insurance coverage based on both how much they use their vehicles and how well they drive.
So-called “usage-based” insurance is already offered by several other manufacturers, including Ford Motor Co., as well as some of the country’s largest insurance companies like Nationwide and Progressive. It has become easier to track vehicle usage thanks to onboard connected car technology and some experts believe that may lead to a switch in the way highway and fuel taxes are levied, as well.
“As demand for more transparent auto insurance pricing grows, usage-based insurance is a powerful way for Hyundai drivers to have greater control over their insurance costs,” said Manish Mehrotra, the executive director of Digital Business Planning and Connected Operations, Hyundai Motor North America. “Our owners expect this kind of technology and want to pay the right amount. No one wants to pay more than they actually should.”
Capturing a Snapshot of driver behavior
The first pay-as-you-drive insurance program, Progressive’s Snapshot, was introduced in the mid-1990s. It focused on tracking driver behavior, rewarding motorists who accelerated and braked more cautiously with reduced rates. Aggressive drivers faced the prospect of being penalized.
Early on, insurers relied on data collected using a vehicle’s OBDII sensor, the data periodically uploaded to the company for analysis.
Hyundai’s approach relies on its Blue Link Connected car technology and, when a vehicle is equipped with a two-way telecommunications system, driving data can be directly uploaded in real time through the Verisk Data Exchange. The system allows driving data to be analyzed and rated. It allows an insurer to adjust rates to reflect how much of a risk the driver poses.
Numerous factors impact rates
The factors Verisk looks at include: “smooth driving, speed responsibility, driving time of day, consistent driving and time behind the wheel,” Hyundai noted in a press release.
Hyundai owners who sign up for the program can keep an eye on how well they’re doing through the automaker’s Blue Link app. It provides an individual Driving Score ranging from 0 to 100, the higher the number the better. It also offers tips on how to improve their ranking.
“For example, a driver could improve their score by braking smoothly, less late night driving and accelerating gently,” said Hyundai.
More and more motorists opt in
Drivers must opt in to the program to allow their data to be tracked. Verisk claims to have already collected information on 240 billion miles of driving data.
“The Verisk Data Exchange was built to make usage-based insurance easier and more accessible,” said Karthik Balakrishnan, senior vice president and general manager of Verisk’s telematics business. “Hyundai shares this vision and together, we look forward to this new collaboration and its many benefits for consumers as well as auto insurers.”
Hyundai joins a growing list of manufacturers who offer usage-based insurance. Ford last December announced teaming up with insurers including Allstate, Liberty Mutual and State Farm on a similar program. As with Hyundai, the automaker uses built-in telematics technology to gather information on driving behavior and usage.
Motorists can directly sign up with insurers like Progressive and Nationwide who tied into a vehicle’s OBDII sensor to collect data.
Privacy concerns
A survey released by Nationwide last December showed growing support for such programs, the company reporting that 35% of new auto business is usage-based. It said it expects that to reach 70% or more over the next five years.
But the Nationwide study also found a majority of those surveyed expressing at least some concerns about the potential impact on privacy.
There are studies suggesting that usage-based programs help reduce the likelihood of a crash by retail vehicle owners. A recent study by Willis Towers Watson found that using telematics to monitor the behavior of commercial vehicle drivers can reduce crash rate by as much as 80%.
An alternative to fuel taxes
With most vehicles expected to come equipped with two-way telematics in the years ahead, experts are studying other opportunities. The technology could provide an alternative to today’s federal and state highway fuel tax system which is based on per-gallon fees. California and several other states have explored the idea of charging a flat, per-mile fee, instead.
That approach could come into play in the years ahead as more and more electric vehicles take to the road since they currently do not directly contribute to highway funding.
