Net-Connected Cars: Good Or Bad For Insurance

Among other factors that can drive car insurance premiums up or down, the issue of safe driving is one that individual policyholders can directly control. Regardless of a car model’s safety rating, or of other risks inherent on the road, an individual’s driving habit can dictate whether he or she gets high or cheap car insurance rates.

Focus vs. distraction

According to auto industry watchers, anything that distracts driver’s attention away from the road is a recipe for disaster. In this view, getting a car connected to the Internet provides just too many distractions; it is an accident waiting to happen.

Fueling this grim scenario is the increasing availability of cars that are always connected to the Internet. This is now possible because of wireless Internet connection via cellular signal, and the availability of portable modems that are either built into the car or purchased separately.

Among such always-online models is the Toyota 2012 Camry, which connects to search engines and to Facebook, and then displays these on a dashboard screen. Similarly, Ford’s new models have a built in browser, and it can display photos or videos on a dashboard screen.

Other devices offer the full suite of things that can be done online, such as send and receive email, browse the web and make Internet calls. Needless to say, experts are waving the red flag against these distractions. For insurers, this could be a signal to charge higher auto insurance premiums.

Wireless connectivity as an early warning tool

On the other hand, proponents of Internet access on wheels argue that despite the potential for distraction, wireless technologies can also be used as an alarm system. It could provide early warning to drivers in case of accidents or other risks on the road.

For example, developers in Italy and the US are testing an accident detection system that can beam alerts to drivers as soon as road accidents happen. Their research suggests that there would be up to 40 percent fewer vehicles involved in a pile-up if such an early warning system is used.

The US government is also currently testing a wireless system that warns road users of impending danger. Begun in 2012, the test setup involves around 3,000 vehicles in Michigan that are all connected via wireless devices.

This system provides real time updates to drivers participating in the study. They are alerted of impending road dangers, and the researchers are measuring how users are reacting to the information and the technology.

Proponents of the always-connected scenario say that distraction (and thereby accidents) can be minimized using audible alerts. This is seen as less distracting than a system that relies on visual cues.

Future trends

Before it becomes widely acceptable, wireless technologies must also prove that it is cheap to use. Even if it can be demonstrated that an always-on car Internet increases safety instead of causing accidents, it still won’t be adopted if the price is too high.

It still remains to be seen whether authorities would promote this technology, and for legislation to keep up with these fast-changing technologies.

What seems clear at the moment is that car insurance companies are keen in supporting the technology. Distraction or safety measure, wireless connectivity is a development that can surely affect the pricing of auto policies.


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