Editing Telematics (section)

===Auto insurance/[[Usage-based insurance]] (UBI)===
{{see also|Auto insurance risk selection}}

The general idea of telematics [[auto insurance]] is that a driver's behavior is monitored directly while the person drives and this information is transmitted to an insurance company. The insurance company then assesses the risk of that driver having an accident and charges insurance premiums accordingly. A driver who drives less responsibly will be charged a higher premium than a driver who drives smoothly and with less calculated risk of claim propensity. Other benefits can be delivered to end users with [[Telematics2.0]]-based telematics as [[customer engagement]] can be enhanced with direct customer interaction.

Telematics auto insurance was independently invented and patented<ref>[http://www.bakosenterprises.com/IP/B-10152004/IPB-10152004.html Nowotarski, Mark, "Progressive Builds a Fortress of Patent Protection", Insurance IP Bulletin, October 15, 2004]</ref> by a major U.S. auto insurance company, [[Progressive Corporation|Progressive Auto Insurance]] {{US patent|5797134}}, and a Spanish independent inventor, Salvador Minguijon Perez ([http://v3.espacenet.com/origdoc?DB=EPODOC&IDX=EP0700009&F=8&RPN=EP0700009&DOC=cca34af1984f0dc47b32e9a9722ad1a148 European Patent EP0700009B1]). The Perez patents cover monitoring the car's [[engine control computer]] to determine distance driven, speed, time of day, braking force, etc. Progressive is currently developing the Perez technology in the U.S. and European auto insurer [[Norwich Union]] is developing the Progressive technology for Europe. Both patents have since been overturned in courts due to prior work in the commercial insurance sectors.<ref>{{cite web|url=http://www.insurancenetworking.com/news/core-systems/progressives-ubi-patents-cancelled-34093-1.html|title=Progressive UBI Patents Cancelled|date=27 March 2014|access-date=18 August 2016|archive-date=21 September 2016|archive-url=https://web.archive.org/web/20160921132746/http://www.insurancenetworking.com/news/core-systems/progressives-ubi-patents-cancelled-34093-1.html|url-status=dead}}</ref>

Trials conducted by Norwich Union in 2005 found that young drivers (18- to 23-year-olds) signing up for telematics auto insurance have had a 20% lower accident rate than average.<ref>{{cite web |url=http://www.aviva.com/index.asp?PageID=55&year=&newsid=2840&filter=corporate,csr,uklife,intlife,ukgeneral,intgeneral,morleyfm,intfm |title=Aviva PLC : Media : News releases : UK : Norwich Union launches innovative "Pay as You Drive"™ insurance with prices from 1p per mile (5 October 2006) |access-date=2006-12-20 |url-status=dead |archive-url=https://web.archive.org/web/20071102204728/http://www.aviva.com/index.asp?PageID=55&year=&newsid=2840&filter=corporate,csr,uklife,intlife,ukgeneral,intgeneral,morleyfm,intfm |archive-date=2007-11-02 }}</ref> 

In 2007, theoretical economic research on the social welfare effects of Progressive's telematics technology business process patents questioned whether the business process patents are [[Pareto efficiency|pareto]] efficient for society. Preliminary results suggested that it was not, but more work is needed.<ref>{{cite web | title = Strauss and Hollis, 2007, Insurance Markets When Firms are Asymmetrically Informed: A Note | url = http://homepages.ucalgary.ca/~jdstraus/Strauss_Hollis_Insurance_Markets_when_Firms_are_Asymmetrically_Informed.pdf | url-status = dead | archive-url = https://web.archive.org/web/20070926053038/http://homepages.ucalgary.ca/~jdstraus/Strauss_Hollis_Insurance_Markets_when_Firms_are_Asymmetrically_Informed.pdf | archive-date = 2007-09-26 }}</ref><ref>{{cite web | title = Hollis and Strauss, 2007, Privacy, Driving Data and Automobile Insurance: An Economic Analysis | url = http://mpra.ub.uni-muenchen.de/11091/1/hollis_strauss_edr_and_privacy_november16_1_.pdf }}</ref> In April 2014, Progressive patents were overturned by the U.S. legal system on the grounds of "lack of originality."

The [[smartphone]] as the in-vehicle device for insurance telematics has been discussed in great detail<ref>Handel, P.; Skog, I.; Wahlstrom, J.; Bonawiede, F.; Welch, R.; Ohlsson, J.; Ohlsson, M., "Insurance Telematics: Opportunities and Challenges with the Smartphone Solution," Intelligent Transportation Systems Magazine, IEEE, vol.6, no.4, pp.57,70, winter 2014
{{doi|10.1109/MITS.2014.2343262}}
URL: [https://ieeexplore.ieee.org/stamp/stamp.jsp?tp=&arnumber=6936433&isnumber=6936425]</ref> and the instruments are available for the design of smartphone-driven insurance telematics.