Improving automobile insurance ratemaking using telematics: incorporating mileage and driver behaviour data

We show how data collected from a GPS device can be incorporated in motor insurance ratemaking. The calculation of premium rates based upon driver behaviour represents an opportunity for the insurance sector. Our approach is based on count data regression models for frequency, where exposure is driven by the distance travelled and additional parameters that capture characteristics of automobile usage and which may affect claiming behaviour. We propose implementing a classical frequency model that is updated with telemetrics information. We illustrate the method using real data from usage-based insurance policies. Results show that not only the distance travelled by the driver, but also driver habits, significantly influence the expected number of accidents and, hence, the cost of insurance coverage. This paper provides a methodology including a transition pricing transferring knowledge and experience that the company already had before the telematics data arrived to the new world including telematics information.

• Record URL:
  • https://doi.org/10.1007/s11116-018-9890-7
• Availability:
  • Find a library where document is available. Order URL: http://worldcat.org/issn/00494488
• Supplemental Notes:
  • Copyright © 2019, Springer Science+Business Media New York. The contents of this paper reflect the views of the authors and do not necessarily reflect the official views or policies of the Transportation Research Board or the National Academy of Sciences.
• Authors:
  • Ayuso, Mercedes
  • 0000-0001-6127-4572
  • Guillen, Montserrat
  • Nielsen, Jens Perch
• Publication Date: 2019-6

Language

• English

Media Info

• Media Type: Web
• Features: References;
• Pagination: pp 735-752
• Serial:
  • Transportation
  • Volume: 46
  • Issue Number: 3
  • Publisher: Springer
  • ISSN: 0049-4488
  • EISSN: 1572-9435
  • Serial URL: http://link.springer.com/journal/11116

Subject/Index Terms

• TRT Terms: Automobile insurance; Data collection; Driver performance; Global Positioning System; Insurance rates; Telematics
• Uncontrolled Terms: Mileage
• Subject Areas: Data and Information Technology; Finance; Highways; Planning and Forecasting;

Filing Info

• Accession Number: 01712041
• Record Type: Publication
• Files: TRIS
• Created Date: Jul 22 2019 8:00PM