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Near‐miss telematics in motor insurance
Author(s) -
Guillen Montserrat,
Nielsen Jens Perch,
PérezMarín Ana M.
Publication year - 2021
Publication title -
journal of risk and insurance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.055
H-Index - 63
eISSN - 1539-6975
pISSN - 0022-4367
DOI - 10.1111/jori.12340
Subject(s) - telematics , automobile insurance , sample (material) , auto insurance risk selection , incentive , actuarial science , business , computer science , insurance policy , key person insurance , economics , telecommunications , microeconomics , chemistry , chromatography
We present a method to integrate telematics data in a pay‐how‐you‐drive insurance pricing scheme that penalizes some near‐miss events. We illustrate our method with a sample of drivers for whom information on near‐miss events and claims frequency records are available. We discuss the implications for motor insurance ratemaking. Our pricing principle is to combine a baseline insurance premium with added extra charges for near‐miss events indicating risky driving (or discounts) that can be updated on a weekly basis. This procedure provides an incentive for safe driving. In our real‐case study illustration, hard‐braking and acceleration events as well as smartphone use while driving increase the cost of insurance.