When I first moved to the U.S. six years ago as a grad student, I bought a 1998 Honda Accord. It had seen better days, but it was a great car. Unfortunately, I had a rude awakening when I tried to buy a car insurance policy: it would cost me an entire month’s salary to insure it for the year.
This made no sense. I had a decade of driving experience and a clean record. Shouldn’t my premium reflect that? I knew I was a good driver, but as a new driver to the U.S. I had no data to prove it.
Right around this time my co-founder Jerry and I were in grad school studying transportation and driving behavior. It was where we had the fundamental insight that inspired Automatic: cars are just big computers on wheels. If I could somehow access the data about my safe driving habits and show it to my insurance company, I bet I could get a premium that fit my actual risk profile.
It was where we had the fundamental insight that inspired Automatic: cars are just big computers on wheels.
At Automatic, we aren’t just unlocking the power of the data hidden in cars. We’re rethinking how cars can fit into our lives, including how we insure them. Today’s insurance policies need to change to take advantage of the connected car technology that’s coming. Here’s what we believe insurance for the connected world should look like:
1. Connected car insurance should be fair
Insurance companies evaluate a lot of risk factors in calculating your premium: how long you’ve had your license, your accident history, the kind of car you drive, and whether you live in a high or low crime neighborhood. But they don’t know how much you drive or how safe your driving habits are. They don’t know this because they’ve never had the technology to get that data—at least, until now.
Drivers also should get the discounts they deserve. There’s no reason a responsible driver should be forced to subsidize someone else’s bad behavior. As a lower risk to the insurance company, a safe driver should pay less for insurance than a risky one. It’s only fair.
2. Connected car insurance should be transparent
Transparency is the key to making sure drivers never feel spied on. This principle is why our teen driver program License+ isn’t a typical parent-spies-on-kid product, but one where both parent and teen are active participants. The same goes for insurance. Drivers should know exactly what information they’re sharing with their insurance company and what it’s being used for so they can make the conscious decision to opt in or out.
3. Connected car insurance should be private and secure
Driving data is sensitive information and should never fall into unauthorized hands. The transfer of this data should be secure and encrypted end-to-end. This is one of the many reasons we build our own hardware. We also don’t share or sell our users’ private information, which you can learn more about in our Privacy Principles.
4. Connected car insurance should be affordable and accessible
Drivers shouldn’t have to purchase a brand new phone or car. It shouldn’t cost drivers extra to demonstrate their safe driving habits—insurance companies should provide an easily affordable way for drivers to do this.
5. Connected car insurance should be like the apps we use today: modern and beautiful
We all use technology products from Apple, Google, Facebook, and Twitter that delight us and make our lives better every day. The auto insurance experience should meet those same standards.
Insurance is at a turning point, with so much room for innovation and improvement. These five principles should guide anyone working in this industry. We have our own plans, of course, and can’t wait to show you what’s around the corner.