For drivers
It rewards safe drivers
Those who drive sensibly will have lower and fairer premiums, so they can save more money. It’s also a good chance for young drivers without much experience to prove themselves to be reliable drivers, as well. Likewise, those who aren’t driving much can benefit from low usage and enjoy a cheaper premium.
It discourages high-risk driving
Potential hikes in premiums can deter drivers from engaging in high-risk behaviors, such as speeding and reckless driving. These drivers might have higher incentives to improve their driving habit, or quit driving altogether. Consequently, there will be fewer high-risk drivers and, hence, fewer traffic accidents on the road.
It improves driver and vehicle safety
The GPS technology in telematics-based insurance can be used to locate a vehicle after it breaks down, crashes, or gets stolen.
For insurers
It helps risk assessment
Insurers can have more data on hand for analyzing the overall driving behavior of the policyholder. Thus, they can make more accurate, more informed underwriting decisions for both new and old clients. Clients with higher risk will be differentiated, so it is less likely that insurance companies will insure high-risk drivers and pay out on large claims that end up increasing rates for safe drivers.
It reflects driving behavior rapidly
Since all data is transmitted to the system almost instantly, any change in behavior, such as refraining from braking sharply, or staying off the roads at night, will be reflected in the premium for that month immediately.
