Why do car Insurance like your Grampa did?

For years I've been saying that I need to buy a new car. Frankly, I'm getting sick and tired of needing a tetanus shot every time I take that rust box on four wheels out for a spin. Yes, I know car insurance is going to play a huge role in the make, model and year of the car I do end up buying. I guess no red sports car for me until I check with a few insurers first. 

I recentIy read a study that said the average person spends approximately 7 minutes a year thinking about their insurance. I probably spend less. This may shock you, but I work in the insurance field (more specifically, the insurtech domain), but when it comes to my own car insurance I have no clue. Weird, right? But I'm really no different than anyone else. 

So what do I do when I need any advice? Do what any good son does, call up my dad. My father suggested I reach out to his insurer (he's been with them since the Beatles first appeared on The Ed Sullivan Show). My grampa, his father, was a client before him, so I thought I'd give them a call and see what they could offer. 

They had me fill out a questionnaire: Age? Gender? Where do you live? Married/Single? Children? Type of car? Income? All that and probably 40 other questions, mostly demographic information. Of course, they also checked into my past claims history, the last secret ingredient to calculate what my premiums would be. 

I haven't been interrogated this much since I was last on Tinder (an account I deactivated once we started dating honey, I swear).

The agent came back with a quote. I was shocked! My sister is paying much less, has had 2 accidents in the last year, which were both her fault, might I add. Why does my sister pay less for car insurance than me? How is that possible? Have they even met my sister? That would certainly change things. I just couldn't get my head around where they came up with that figure. I had to know more.

Turns out, they calculate it by compiling demographic information like your age, gender, where you live, income, whether or not you have kids, type of car, etc., then add your claims history - and compare it against ages old data they have on other drivers' history and claims - and put pops out some magic number. 

But, they missed one major factor: my actual driving behaviour. How could they provide me with a quote without knowing how well I drive. Do I regularly speed, accelerate quickly, take corners at high speeds, do I text and drive? Aren't these questions more relevant than what my postal code is? But how would they get that information anyways?

So I picked up the phone and spoke to my father and grampa. Funny enough they both had the very same experience, "That's how insurance is boy, that's how it'll always be", my grampa chortled.

I refused to believe that was the only way to get insurance, it just seemed ludicrous. Why get insurance that doesn't factor in how I drive, how does that make any sense at all?

There must be other ways to get insurance than this one-size fits all car insurance approach! We should have car insurance designed for us, as individuals, in mind.

Who'll save us? Who'll give us car insurance that's made for me and me alone.

To the rescue... Baseline Telematics

Insurtech mainstay Baseline Telematics uses telematics data to develop insurance solutions for the insurance industry, they've re-invented insurance for mobile users. Amongst the possibilities that their solutions offer, is giving insurers the option of having usage-based insurance.

Usage-based insurance (also referred to as UBI) is vehicle insurance that sets its premiums based on actual driver behavior. Rather than the "traditional" method, which seemingly uses witchcraft to see how the identical twin you never met drives, it considers how you actually drive.

Wait, car insurance based on how people actually drive....  we never did this before... why?

When it comes to UBI, there's 2 basic types: Pay-As-You-Drive (PAYD) and Pay-How-You-Drive (PHYD). 

Pay-As-You-Drive car insurance makes it simple: it's essentially the distance you drive. Typically, you're charged a base fee plus a rate/km. (or mile) times distance driven. Of course, it can be made more complex, adding on considerations such as vehicle driven, time driven, where driven etc. - but at it's core, it's about the distance you actually drive.

Pay-How-You-Drive car insurance is a bit more unique. PHYD uses telematics data to consider what your driving behavior is in setting your risk of being covered (and thus your premium). What PHYD measures is your actual driving behavior, how safe you drive. It considers factors such as hard braking, speeding, over-accelerating and distracted driving as well as actual trips/distance driven. From this data, they can calculate how safe a driver someone actually is by generating a safety score. In setting your premium, you're given a rebate (up to 25%) based on how safe you drive off a set rate. In effect, the safer you drive, the less you pay. Insurers charge you less because you're less risk to cover.

The conclusion

 When it comes to car insurance, you no longer have to rely on the same insurance your grampa did, you have options. You deserve insurance built specifically for you, that considers you. 

While you're at it, talk to grampa about the new options that he now has next time he's renewing his insurance.