By Natalie Hughes
Purchasing a new vehicle is an extremely exciting milestone, but if you’ve ever done so, you know it comes with a cost. Car insurance is a messy topic and the biannual or yearly payments that go along with it are no better than a thorn in the side. Perhaps this widely shared inconvenience is why General Motors has decided to begin selling car insurance for its drivers at a very competitive cost. In fact, the automaker will be unveiling its new insurance division under the existing On-Star connectivity brand in such a unique way that it may alter the industry altogether. The business will be launched based on the idea that its vehicles can track drivers’ behavioral data and set insurance rates accordingly. It is without doubt that customers will be paying a premium to reap the benefits of individualized and effortless car insurance rates, giving GM a competitive advantage like no other.
Pricing for OnStar Insurance will be based on highly less traditional factors than the typical categories like age, gender, location, and credit histories. Rather, the new business will be pegged more to the spectrum of data showering driving performance. While this may seem like an invasion of privacy at first glance, drivers must simply obey basic traffic laws to be classified as a “safe” driver and receive lower rates. Recently, the Detroit-based company stated that the data collection will occur via the OnStar connected car service that comes installed in each of its automobiles. Customers will first consent to have their driving habits tracked, and then the observation entails. Those who obey speed limits, avoid sudden stops, and practice other satisfactory behavior will be rewarded with lower insurance rates.
Launching this auto-insurance business is only the newest tactic for the automobile giant to maximize revenue and increase consumer loyalty. The new coverage will compete heavily with traditional auto insurers by using owners’ own data. Although Andrew Rose, President of OnStar Insurance Services, refused to disclose projected earnings of the new endeavour, he stated that, “the opportunity is enormous” and “it’s going to be an evolution.”
Although GM is the first to offer such modern insurance evaluations, other car companies are rapidly branching into services that aim to capitalize on the growing uses of data generated by vehicles’ onboard sensors. In other words, the timing of General Motors’ announcement is crucial. Although the vehicle data driven insurance market is largely untapped, the firm should enjoy its competitive advantage while it lasts; that is until new entrants seize the technology and the data driven auto-insurance industry settles into a long-run equilibrium.