Insurance technology of the future

How will future technology affect the UK car insurance industry?

The car insurance industry is currently recording more losses than ever before, for a number of reasons. The costs of operation are high and the number of claims made even higher. Insurers make a number of considerations when calculating the burning cost premium, which determines what the premium rates will be. This includes adding up the cost of claims, administration costs, acquisition cost, investment income and profit margin. Still, more and more companies make no tangible returns at the end of the fiscal year. It has emerged that most of their investment goes towards settling claims for bodily injuries and paying the cost of accidents for uninsured drivers.

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As the government plans to introduce Continuous Insurance Enforcement (CIE) beginning 2011, the number of uninsured drivers is expected to completely go down. This will reduce spending expenses for most insurance companies. Already, the DVLA keeps tabs on who has renewed their insurance policy and who has not. This is the data it relies on to determine whether you are entitled to making changes in your tax disk or not. A new technology will be applied where drivers who have not renewed their insurance policies are followed up. Hefty fines are likely to be slapped on all those who default, except for those who submit an official SORN statement declaring that their vehicles are off the road.

Industry players are working to come up with technology that can help unearth past claims made by an insurance policy applicant. Currently, insurance companies use information supplied by the driver on the quote form only. In future, it is likely that insurers will be able to access all insurance related data on a potential client available across the industry to find out whether they have a history of claims or not and thus adjust premiums accordingly. Many motorists lie about having made claims in the past to avoid paying high premiums.

Young drivers are responsible for a large percentage of all road accidents in the country. In accidents involving young drivers, insurance companies end up spending more in compensation and sometimes where the car is totaled, replacement costs. There have been suggestions for the introduction of a graduated driver license. One would be required to be competent in all-weather, nighttime, motorway and rural driving in order to be licensed under GLD.

The current driving test does not test the above mentioned areas, which are high risk for the young driver. With the new measures in place, young drivers are likely to be more careful on the road, thus averting a good number of accidents. The success of this approach will still largely depend on the young person’s attitude towards driving and their understanding of the huge responsibility that comes with driving. If the approach is found to be effective, insurance companies will save a good amount of money.

Insurance companies may turn to technology that can be fitted in the car for monitoring of the driver’s behavior on the road. Such technology already exists and if insurance companies are to cut costs and identify stage-managed accidents (tantamount to fraud), they must adopt it. The technology collects data on driving times, speed and g-force when breaking or taking corners. With this, insurers can match premiums to good or bad practice. Copyright 2009 All Rights Reserved