Challenges of UBI and Telematics

A more modern technology created by auto insurers is usage-based insurance (UBI) and telematics, where the cost of the service is inversely correlated with the way the driver behaves (Tarantino, 2016). The advantages and difficulties of UBI and telematics in respect to IT and business objectives are as follows.

UBI and telematics have made it possible for motor insurance companies to evaluate accident-related damages accurately and determine the appropriate amount of compensation. The technology also allows the firms to determine the actual cause of the accident by examining the driving data recorded on their monitor devices; this way, the companies save a lot as they do not compensate for reckless driving. With the help of the technology, insurance firms can generate the correct premiums their clients should pay for their business to remain profitable. UBI and Telematics enable insurance companies handles enormous quantities of data as well as confidential data. Information Technology allows them to manage this data and ensures the security of the same.

Challenges of UBI and Telematics

UBI programs, especially those that utilize Telematics can sometimes be costly and resource demanding to the insurer. The program highly depends on expensive technologies to capture, synthesize and reproduce driving data. Moreover, UBI is still at its emerging stage; as a result, a lot of uncertainties lies towards its adoption a condition that keeps customers away. Insurance firms also find this as a challenge, as they may fail to correctly interpret the data and integrate it into their new price structure to maintain profitability. The insurance firms may also be forced to incur extra expenses in training their staff on how to implement the Telematics technology.

Conclusion

Failure to understand the operationalization of UBI and Telematics Technologies may make it useless in the insurance business. The advantages it brings with it in the insurance industry, however, cannot be under stated. Telematics partners should, therefore, educate staffs in insurances businesses on how to execute the program better, and also make the technology more affordable.

Work Cited

Tarantino, Nino “How to Implement UBI and Telematics Programs”. INSIGHTS, 2016, pp. 19-22.