V2V technology could benefit auto premiums

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Vehicle-to-vehicle (V2V) communication, the brainchild of auto innovators and darling of the National Highway Traffic Safety Administration (NHTSA), may also come to be seen as a plus for insurers, appointed producers and policyholders.

According to the NHTSA, V2V technology is expected to prevent between 70% and 80% of vehicle crashes involving unimpaired drivers. insuranceQuotes.com’s senior analyst Laura Adams believes that could translate into savings for consumers.

“Insurance companies are always interested in rewarding customers to encourage safe driving to translate to fewer claims. It’s a very important part of their business model,” Adams said. “I think [a discount in rates] is the likely outcome of V2V.”

Adams pointed to the uptake of pay-as-you-drive insurance programs, or telematics, to explain her position.

Telematics allows consumers to qualify for “safe driver discounts” and, ultimately, better insurance rates by installing a data collection device that transmits information about driving behavior. In Adams’ view, the practice represents a trend of insurers edging away from traditional rate-setting factors like driver experience, gender and credit rating.

“It’s an interesting shift in the industry because it really levels the playing field for everyone,” she said, noting typical discounts range from 15% to 25% on annual rates.

V2V communication could qualify for even higher discounts if it turns out to prevent the percentage of accidents predicted by the NHTSA.

However, telematics—and likely V2V communication—comes with its own demons. Consumers must be willing to give up some level of confidentiality regarding how and when they drive to qualify for rate savings. And it isn’t just a privacy concern. Adams said if insurers or manufacturers choose to share collected data with law enforcement, it could translate to an increase in moving violations and—paradoxically—higher insurance rates.

“One of the negatives we can imagine from this type of technology could be the fact that if an authority knows you’re speeding or following too closely, it may mean more tickets,” Adams pointed out. “A moving violation can cause rates to increase pretty dramatically. Even a speeding ticket can cause rates to go up 30%.”

“From a consumer’s perspective, that’s where my mind goes. What could be the worst case scenario with this?”
Adams cautioned that V2V is still about five to 10 years off, but when it arrives, it could “revolutionize the insurance industry.”

“Insurance companies are really going to have to rewrite how they look at liability,” she said. “You can imagine a scenario where somebody gets a warning [from their car’s V2V system] and then slams on the brakes and ends up causing a wreck. Would the consumer feel the V2V was at fault?”

A potential discount for V2V technology hinges on these and other questions, Adams said. Depending on how consumers respond to telematics, the industry could be in for big changes. Thus far, interest in telematics has increased, but a solid 37% of consumers say they would not be interested in using pay-as-you-go systems “no matter what,” according to a November insuranceQuotes.com survey.

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