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The use of telematics devices to improve automobile insurance rates

Guillén, M., Nielsen, J. P. ORCID: 0000-0002-2798-0817, Ayuso, M. & Perez-Marin, A. M. (2019). The use of telematics devices to improve automobile insurance rates. Risk Analysis, 39(3), pp. 662-672. doi: 10.1111/risa.13172


Most automobile insurance databases contain a large number of policyholders with zero claims. This high frequency of zeros may reflect the fact that some insureds make little use of their vehicle, or that they do not wish to make a claim for small accidents in order to avoid an increase in their premium, but it might also be because of good driving. We analyse information on exposure to risk and driving habits using telematics data from a Pay-as-you-Drive sample of insureds. We include distance travelled per year as part of an offset in a zero-inflated Poisson model to predict the excess of zeros. We show the existence of a learning effect for large values of distance travelled, so that longer driving should result in higher premium, but there should be a discount for drivers that accumulate longer distances over time due to the increased proportion of zero claims . We confirm that speed limit violations and driving in urban areas increase the expected number of accident claims . We discuss how telematics information can be used to design better insurance and to improve traffic safety.

Publication Type: Article
Additional Information: This is the peer reviewed version of the following article: Guillen, M. , Nielsen, J. P., Ayuso, M. and Pérez‐Marín, A. M. (2019), The Use of Telematics Devices to Improve Automobile Insurance Rates. Risk Analysis, 39: 662-672., which has been published in final form at This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions.
Publisher Keywords: Usage based insurance; pay-as-you-drive; mileage
Subjects: H Social Sciences > HF Commerce
H Social Sciences > HG Finance
T Technology > TL Motor vehicles. Aeronautics. Astronautics
Departments: Bayes Business School > Actuarial Science & Insurance
SWORD Depositor:
[thumbnail of 2018-RISK-ANALYSIS-Accepted manuscript-20180712withsummary (1).pdf]
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