Allstate Insurance Co. has launched a second usage-based mobile application as auto insurers increasingly look to monitor policyholders’ experiences through their smartphones.
Allstate’s Drivewise mobile app measures driving behavior through smartphones to set insurance discounts for motorists points. On June 5, Allstate also introduced Star Driver, another usage-based app that allows parents and teens to set limits on where, when and how fast a teen is allowed to drive and alerts parents via text or email if the teen breaks the deal.
“Going forward, it’s more likely for the reasons [of] lower costs, greater interactivity and more precise monitoring capabilities, that usage-based insurers will increasingly monitor a policyholder’s driving experience via their smartphone, rather than an onboard device,” said Sam Friedman, insurance leader for Deloitte Research at Deloitte’s Center for Financial Services in New York.
“It could prove to be a game-changer in convincing more people to test-drive a telematics program," he said.
User based insurance
The Drivewise app, rolled out by the Northbrook, IL-based insurer last year and supported by Android and Apple iOS platforms in 16 states, taps GPS and other technology to track speed, hard braking, location and time of day. Allstate uses the data to calculate a discount for each customer.
Usage-based insurance, in which premium costs are based on type of vehicle used, measured against time, distance, behavior and place, differs from traditional insurance, which rewards “safe” drivers by lowering premiums. Since the rewards are based on history, it can take a long time for premiums to reflect safer driving patterns.
Smartphones bring a new element to usage-based technology. Up to now, the dominant method has been for drivers to plug an insurer-supplied device that plugs into a car diagnostic port, typically below the steering wheel. OnStar’s communication system, which tracks a driver’s mileage, also is used.
While a small percentage of motorists currently use a smartphone tracking app, it is only a matter of time before consumers realize that downloading an app on a smartphone to have their driving performance monitored by insurers is easier than having to load an additional device into their car, according to Mr. Friedman.
Consumers also can receive real-time feedback on their driving behavior through mobile devices, with tips offered on how to drive safer – potentially lowering insurance premiums, he said. They can also receive real-time information on road conditions and traffic hazards via their mobile.
Although the app raises standard privacy concerns, consumers’ eagerness to conduct a range of business over mobile devices, means this issue is unlikely discourage users, Mr. Friedman said.
Consumers accepting the app also would benefit the insurer, because it is cheaper to download an app to a policyholder's mobile than to pay for an additional device, ship it and then burden the consumer with installation.
Such savings could help finance the discount given to policyholders to test drive a usage-based product, as well as help finance discounts for good drivers overall, Mr. Friedman said. In addition, since the app resides on what is, in effect, a mini-computer, initial data processing can be done on the device itself.
Insurers may also benefit because a mobile app gathers first-hand data on the behavior and performance of the driver carrying the smart phone, rather than the more traditional auto underwriting focus on the vehicle being driven. These are not mutually exclusive approaches. Indeed, monitoring of drivers together with more standard criteria about the vehicle are complementary efforts that could help create a 360-degree view of the total exposure being underwritten by insurers.
Progressive eyeing field
Progressive Insurance Co., eying mobile apps, held a contest this year in which more than a dozen app development companies tried to devise systems that can match the accuracy of Progressive's Snapshot measurement tool. A Progressive spokesman says the company is evaluating the results and is nott naming the companies involved, the Automotive News reported. A Progressive spokesman could not be reached for comment.
Promoting safe driving
If mobile apps help drivers avoid accidents, the technology could raise the profile of the insurance industry. Allstate spokesman Chris Bauer cited a recent Allstate press release for the launch of its Star Driver app in which executive vice president of product operations Steve Sorenson said:
"As a father with teen drivers in our house, I know it can be a very anxious time for families. It can take time to gain the experience and knowledge to be a smart driver.
“We're building these tools to help coach teens and provide parents with greater peace of mind.”
Michael Barris is staff reporter on Mobile Marketer, New York
Michael Barris is staff reporter on Mobile Marketer and Mobile Commerce Daily, New York.